Annual Report 2009 Proxy Form ...... 120 Branch Network ...... 117 Correspondent Banking Network ...... 114 Pattern ofShareholding ...... 66 Consolidated FinancialStatements ...... 26 Notes totheFinancialStatements ...... 25 Statement ofChangesinEquity ...... 24 Cash FlowStatement ...... 22 Profit andLossAccount ...... 21 Balance Sheet ...... 20 Auditors' ReporttotheMembers ...... 17 Sharia'h Adviser'sReport ...... 16 Review ReporttotheMembers Statement ofCompliancewiththeCodeCorporateGovernance ...... 13 Statement ofInternalControl Directors' Report Notice ofAnnualGeneralMeeting...... 07 Financial HighlightsataGlance ...... 03 Corporate Information ...... 09 ...... 05

...... 14

Barrister atLaw Haidermota &Co. Legal Adviser Chartered Accountants Ernst &YoungFord Rhodes SidatHyder Auditors Syed ShahSajidHussain Company Secretary Mr. HasanA.Bilgrami Mr. HishamHammoud Mr. AhmedGoolamMahomedRanderee Mr. AliRazaSiddiqui Human Resource &CompensationCommittee Mr. MohamedAmiri Mr. HasanA.Bilgrami Mr. AhmedGoolamMahomedRanderee Risk Managemnt Mr. HishamHammoud Mr. HasanA.Bilgrami Mr. AhmedGoolamMahomedRanderee Chief Justice(Retd.)MahboobAhmed Executive Committee Mr. ShabirAhmedRanderee Mr. AliRazaSiddiqui Mr A Mufti IrshadAhmadAijaz Professor Dr.FazlurRahman Justice (Retd.)MuhammadTaqiUsmani Sharia'h SupervisoryBoard Mr. ShabirAhmedRanderee Mr. MohamedAmiri Mr Mr. HasanA.Bilgrami Mr. AliRazaSiddiqui Mr. AhmedGoolamMahomedRanderee Chief Justice(Retd.)MahboobAhmed Board ofDirectors udit Committee . HishamHammoud . HishamHammoud Member Member Member Chairman Member Member Chairman Member Member Member Chairman Member Member Chairman Member &Sharia'hAdviser Member Chairman Chief ExecutiveOfficer Chairman 03 Annual Report 2009 04 Annual Report 2009 www.bankislami.com.pk Website Fax: (92-21)34391318 Phone: (92-21)34387960-61 Karachi. P.E.C.H.S. OffShahra-e-Quaideen, Dagia House,241-C,Block-2, Technology Trade(Private)Limited, Share Registr Email: [email protected] Fax: (92-21)35378373 Phone: (92-21)111-3247(BIP)-111 Karachi. Block-4 Clifton, Dolmen City,MarineDrive, 11th Floor,ExecutiveTower, Registered Office Mr. SyedShahSajidHussain Mr. SyedMujtabaH.Kazmi Mr. SyedAkhtarAusaf Ms. ShebaMatinKhan Mr. ShamshadAhmed Mr. RehanShujaZaidi Mr. MuhammadShoaibKhan Mr. MuhammadImran Mr. MuhammadFurqan Mr. MuhammadFaisalShaikh Mr. KhawajaEhrarulHassan Mr. HasanA.Bilgrami Mr. FarooqAnwar Mr. AsadAlim Mr. ArsalanVohra Mr. Ahmed Mustafa Mr. AdnanHamidAli Management (inalphabeticalorder) ar Head, Finance Head, CorporateFinance Head, RiskManagement Head, HumanResources Head, TradeFinance Head, InternalAudit Head, Treasury&FinancialInstitutions Head, Consumer&RetailBanking Head, CreditAdministration Head, ProductDevelopment Head, Compliance Chief ExecutiveOfficer Head, Operations Head, InformationSystems Head, RiskP Head, Branc Head, Administration&GeneralServices h Oper olic y & ations Analytics * ProfitandLossfiguresfor2006representperiodfrom 7th April, 2006 to 31stDecember, 2006 Capital Adequacyratio Financing todepositratio-ADR (%) Net Spreadtogrossreturn(%) Earning perShare(Rs.) Market ValueperShare(Rs.) Break upValue(Rs) RATIO Number ofbranches Number ofstaff Shareholders Fund Share Capital Deposits F Assets BALANCE SHEET Profit/ (loss)aftertax T Profit/ (Loss)beforetax Oper Other Income Provisions Core BankingIncome Fee,Commission,Brokerage andExchange Income Net Spread Profit paid Return earned PROFIT ANDLOSSACCOUNT axation inancings ating expenditure (1,766.12) 1,287.63 1,222.17 2,193.89 (478.94) (562.91) (111.20) 20.39% 315.91 971.72 27,987 13,282 34,287 44.3% (0.91) 1,471 4,740 5,280 83.97 26.78 2009 5.89 8.98 47% 102 (1,033.90) 1,468.69 (229.15) (130.56) 39.83% 12,478 19,089 (52.93) 176.22 880.55 141.39 739.16 729.53 50.3% 2008 (0.12) 1,188 5,192 5,280 6,528 54.75 Rupees inmillion 7.25 9.83 52% 102 (100.46) (510.59) 37.92% 14,447 (37.02) (28.37) 369.67 298.22 303.84 602.06 2007 49.5% (0.13) 16.20 12.01 3,845 3,200 9,934 3,963 63.44 68.83 71.46 40% 563 36 (159.29) 2006* 61.83% 53.94% 81.34% (34.40) 100.01 2,003 2,000 1,778 4,025 (8.35) 26.05 40.38 (1.00) 85.51 81.34 18.67 (0.04) 10.55 10.01 4.17 959 236 10 05 Annual Report 2009 06 Annual Report 2009 Total Financings(Rsinmillion) Total Deposits(Rsinmillion) Employee Count 3,963 9,934 2007 2007 2007 563 12,478 6,528 1,188 2008 2008 2008 13,282 27,987 1,471 2009 2009 2009 Total Investments(Rsinmillion) Total Assets(Rsinmillion) Branch Network 14,447 3,864 2007 2007 2007 36 19,089 5,020 2008 2008 2008 102 34,287 6,813 2009 2009 2009 102 iv iii ii i Notes: Karachi: March09,2010 6- ANY OTHERBUSINESS 5- 4- SPECIAL BUSINESS 3- 2- To confirmminutesofthe5thAnnualGeneralMeetingheldonMarch28,2009. 1- ORDINARY BUSINESS Karachi, totransactthefollowingbusiness: will beheldInshallahonTuesday,March30,2010at8:00:a.m.HotelRegentPlaza,Shahra-e-Faisal, Notice isherebygiventhatthe6thAnnualGeneralMeetingofMembersBankIslamiPakistanLimited 241-C, PECHS Society,Karachi,ofanychange intheiraddress. Members arerequestedtopromptly notifyShareRegistrar,M/s.TechnologyTrade(Pvt.) Ltd.,DagiaHouse, corporate membersshould bring theusualdocumentsrequiredforsuchpurposes. proxy mustencloseanattested copyofhis/herComputerizedNationalIdentityCard. Representativesof bring his/herComputerized NationalIdentityCardwithhim/hertoprovehis/heridentity, andincaseof An individualbeneficialowner oftheCentralDepositoryCompany,entitledtovote atthismeetingmust than 48hoursbeforetheholdingofmeeting. and voteinthemeeting.Proxiesordertobeeffective mustbereceivedattheregisteredofficenotless A membereligibletoattendandvoteatthismeeting may appointanothermemberasproxytoattend The Members'RegisterwillremainclosedfromMarch 25, 2010toMarch31,(bothdaysinclusive). of August7,2009. To approveremunerationtothenon-executivedirector/ChairmanasrequiredbySBPCircularNo.14 classes.” to increaseorreducethecapitalanddividesharesinfortimebeingintoseveral thirteen hundredmillion(1,300,000,000)ordinarysharesofRs.10/-(Rupees:Tenonly)eachwithpower The sharecapitaloftheCompanyisRs.13,000,000,000(Rupees:Thirteenbilliononly)dividedinto be andisherebysubstitutedbythefollowingnewClause5: (Rupees: Thirteenbilliononly)andaccordinglyClause5oftheMemorandumAssociationBank “Resolved thattheAuthorizedShareCapitalofBankbeandisherebyincreasedtoRs.13,000,000,000 eligible, offerthemselves forre-appointment. T T ended December31,2009togetherwiththeAuditors'andDirectors'Reportsthereon. To receive,considerandadopttheAuditedFinancialStatements(separateconsolidated)foryear To transactanyotherbusinesswiththepermissionofChair. Increase inAuthorizedCapitaloftheBank o appointauditorsofthebankfory he presentauditorsM/s.Ernst& Y oung F ord RhodesSidatHyder, Chartered Accountants, retireandbeing ear endingDecember31,2010andtofixtheirremuner Sy By OrderoftheBoard, ed ShahSajidHussain Company Secretary ation. 07 Annual Report 2009 08 Annual Report 2009 This statementsetsoutthematerialfactsconcerningresolutioncontainedinNoticepertainingto Increase in special businesstobetransacted atthe Annual General MeetingoftheBanktobeheldonMar Complying toSBPCircular No.14of A Current T obtained. in Bank’s Board/committeemeetings. to compensatethemadequatelyfortheirgreatertimecommitmentandlegalexposurewithregardparticipate for attendingBoard/comitteemeetings. thousand only)fortheChairmanandRs.300,000/-(Rupees: recommended forshareholdersappro the ListingRegulationNo.27 Banking CompaniesOrdinance,1962necessarynoobjectionofSBPhasbeenobtainedandasrequiredin Board consideredappropriatetoincrease view ofissuecapitalinfuture,ifan o appro ugust 7,2009. A v uthorized CapitaloftheBankisRs.6BillionandPaid-up Capital oftheBankisRs.5.2Billion.In e remuneration tothenon-executi A uthorized CapitaloftheBank STATEMENT UNDERSECTION160OFTHECOMPANIESORDINANCE,1984 T he Kar y , andasallowed inSection92oftheCompaniesOrdinance,1984 A v ac T al annualremuneration ofRs.650,000/-(Rupees:Sixhundredfifty ugust 7,2009,theBoardinitsmeetingheldonMar he remuneration ofthechairman/director(s) isbeingrecommended hi Stock Exchange (Guarantee) Limitedpriorclearance hasbeen A uthorized CapitaloftheBanktoRs.13Billion. As requiredinthe v e director/chairman asrequired by SBPCircular No.14of T hree hundredthousnadonly)fortheDirector(s) c c h 4,2010has h 30,2010. are thehighlights: On behalfoftheBoard,Iampleasedtopresent6thannualreportBankIslamiPakistanLimited.Following phases ofiMal during2010. improved to11th positionamongst1-LINK members.Weareaiming tocompletedeployment ofthenext us tohaveastable,costeffective platformcomparedtoourpeers.Ourmarketshare inATMtransactionshas sharia compliantcorebanking system,iMal.WeremainthelargestuserofLinuxin Pakistanwhichhashelped Our technologyinfra-structure wasfurtherstrengthenedduringtheyearwithfull deploymentofstateart the depositbase. focus onretaildeposits,afurther5%to10%reduction incostoffundcoupledwithatleast50%increase increase indeposits,costoffundsactuallydeclined.BIPL willcontinuetofollowthesamestrategy–strong our fiveandtendepositoryproductswhichnowaccounts for21%ofthedepositbase.Despite124% Current andSavingAccountsrecordedimpressivegrowth. EvengrowthinFixedDepositswaspropelledby sensitive accounts,BIPLasstrategyfocusedonretailcustomer whicharestable,lessratesensitiveandloyal. is oneofthefewbanksinPakistanwhichhasagenuine depositfranchise.Insteadoftargetinglarge,rate The successstoryoftheyearwasgrowthindeposits, whichcamealmostentirelyfromretailsegment.BIPL are aimingtoclosetheyearataround60%ADRwith NPL's containedatlessthan5%oftheportfolio. performing financingconsistsofqualitycollateralwith amarket.Weexpectstrongrecoverythisyear. is expectedtocloseinthesecondquarter.TheBookquality remainsgoodandimproving.Mostofthenon- also successfullynegotiatedwithCITIBankacquisition ofitsmortgageportfolioRs.1.5b.Thistransaction Growth inconsumerfinancingwascontained,thoughtheBankcontinuedtofinancegoodcredit.BIPLhas less than50%,goingforwardthesignsareverypositive.Almost30%growthcameinlastquarteronly. corporate creditofftakewasslowtherebydryingupappetiteforqualitycredit.WhileourclosingADRisstill had budgeted.Duetoeconomicin-stability,wepreferredconservetheliquidity.Atsametime,private Rs. 563MbeforetaxandEarningPer Sharestood(0.91).Thisisapproximately Rs.250Mmorethanwhatwe Due toaheavyexpansionlastyear,thefullcostimpactofwhichcamethisBIPLisreportingloss BankIslami's performancefollowedalmostasimilartrend. reversed to10.52%YoYinDecemberdueanincreasepriceofessentialcommodities,especiallyoil. in theeconomygrew.CPIInflationtoucheditslowestlevelof8.9%YoYOctober2009,buttrajectory private sectorcreditoff-takeshowinganimprovementtowardsthelaterpartofperiodunderreviewasconfidence that wereimplemented.LargeScaleManufacturingsectorregisteredaminorgrowthduringtheyearwith exchange financingforoilimportpaymentsandrationalizationofsubsidiesonelectricitytariffswerereforms by 250bpsonacumulativebasisduringtheyear.AsperIMFProgramdynamics,phasingoutofforeign management alongwithachievementofmajortargetssetbytheIMFenabledSBPtocutDiscountRate billion inDecember2008toUSD14.3602009.Improvedfiscalandmonetarypolicy worker’s remittancescontributedtowardstheincreaseinforeigncurrencyreservesby57.17%fromUS$9.138 To date,IMFhasdisbursedUS$6.5billionunderthesaidArrangement.Moreover,inflowsinformof key indicatorsrecoupedasanoutcomeofPakistan’sentranceintotheUS$11.3billionIMFStand-ByArrangement. beginning toshowuphereandthere.CY2009portrayedimprovedprospectsformacroeconomicstabilityas Performance ofthePakistan'seconomyshowedsignsimprovementduringyearwithgreensprouts Loss After Total Financing-net Total Assets Total Deposits Employees Branches Shareholder's Equity Total Investments Tax Gro wth % (Rs.inMillion) (Rs. inMillion) 4899 5.3 (805%) (52.93) (478.939) e-9Dec-08 Dec-09 7971,7 124% 19,089 12,478 13,282 34,278 27,987 ,7 ,8 24% -9% 1,188 36% 5,192 1,471 5,020 4,740 6,813 102 ,2 104% 6,528 102 80% 09 Annual Report 2009 Head count in 2009 increased by almost 24%. Most of the hiring took place in the branches. Head count/branch of BIPL remained impressive at around 14, which is one of the best in the industry. The highlight of this year was our focus on Training. BIPL is strictly following mandatory training hours for all employees which in some cases is as high as 80 hours. The first batch of trainee officers has graduated and assumed responsibility in the branches. We plan to induct a few more batches this year in Karachi, Lahore, Islamabad, and Balochistan where we have a strong presence.

BIPL also continued with focus marketing initiatives. Our greatest asset today is probably our brand name 'BankIslami'. Going forward, we plan to maintain presence in selected media segments.

Changes in the Board: We would like to welcome Mr. Mohamed Amiri and Mr. Hisham Hammoud, both nominees of Dubai Bank on the Board. We would also like to place on record our deep appreciation for the contribution made by Mr. Ahmed El Shall, nominee of Dubai Bank, who stepped down after close of the year. Ahmed was involved with BankIslami since 2006 and played an important role as Chairman of the Audit Committee. We wish him best of luck in his future endeavors

Minimum Capital Requirement: Owing to our on-going discussions with Emirates Global Islamic Bank for an acquisition leading to merger, State Bank of Pakistan has kindly relaxed the applicability of Minimum Capital Requirement till March 31, 2010. In case the transaction does not goes through, the Board is committed to meet the short fall.

Future outlook: As discussed earlier, the reason for our losses this year is non-absorption of operating costs due to lower asset volumes. Besides that, BIPL has all the right straits which a successful bank may wish to have. Our net-work is large and well spread out, deposit base is stable and cost effective, intermediation cost is within the top quartile in the industry, NPLs are low and that too contained and technology base is one of the best. With improving asset deployment, BankIslami achieved operating break from December. On full year basis, we will inshallah report a profit starting from first quarter. No large expansion in net-work is envisaged this year.

Corporate and Financial Reporting Framework The Board of Directors is fully cognizant of its responsibility under the Code of Corporate Governance issued by the Securities and Exchange Commission of Pakistan and adopted by the State Bank of Pakistan. The following statements are a manifestation of its commitment towards high standards of Corporate Governance and continuous organizational improvement:

1. The financial statements prepared by the Management of the Bank present fairly its state of affairs, the results of its operations, cash flow and changes in equity.

2. Proper books of account of the Bank have been maintained.

3. Appropriate accounting policies have been consistently applied in preparation of financial statements

Annual Report 2009 except as disclosed in the financial statements and accounting estimates are based on reasonable and prudent judgment.

4. International Accounting Standards as applicable in Pakistan have been followed in the preparation of financial statements and any departure therefrom has been adequately disclosed.

5. The system of internal control is sound in design and has been effectively implemented and monitored.

6. There are no doubts upon the Bank's ability to continue as a going concern.

7. There has been no material departure from the best practices of Corporate Governance as detailed in the listing regulations.

8. The value of investments of the Bank's Provident Fund based on un-audited accounts at December 31, 2009 amounted to Rs. 78 million.

9. The purchase and sale of shares by the Directors and the Chief Executive during the year is given in enclosed annexure.

10 The presentauditorsErnst& Auditors The patternofshareholdingasat31stDecember2009isannexedwiththereport. Pattern ofShareholding an effectiveoperatingplatformtoexecutethebusinessstrategy Rating AgencyLimited(PACRA),reflectingBankIslamiwellconceivedbusinessstrategyandestablishmentof The Bankhasbeenassignedalongtermentityratingof'A'andshort'A1'byPakistanCredit Credit Rating view torefineprocesses,controlsandguidelinesnotonlymitigate,butalsoeffectivelymanagerisk. tolerance levelvis-a-visBIPL'sriskappetiteinrelationtoitssize,currentpositionandmarketstanding,witha its impactreviewedonaperiodicbasis.Thispro-activeapproachhelpsinoutliningtheorganization’srisk risk level.Theriskswhenidentifiedandanalyzedarefurtherweighedagainsttheapplicableweights ideas whichneverseethelightofdayareusuallyoneshavebeenshelvedduetoanunacceptable into ourdailybusinessroutine.Ideasanddecisionsareheavilybasedontherisk/rewardtrade-offsomeof BIPL perceivesthemanagementofrisknottobelimitedadepartmentorfunction,butrathershouldread- likelihood ofoccurrence. risk aswellotherrisksbeingfacedbytheorganization,alongwithmagnitudeoftheirimpactand Finance, Treasuryandotherrelatedfunctionsreviewthecriticalriskareasofoperational,creditmarket of informationisthroughthededicatedfunctionriskmanagement.TheHeadCredit/Risk,Operations, Committees relatedtothemanagementofrisksatBIPLformmainlayerframework,inflow/outflow dedicated andgrowingteam,whichshareourcorestrategicvaluesincludinganeffectiveSharia’hcompliance. effective, ithastoberunonanenterpriselevel.Ourframeworkcomprisesofaseparatedepartment,with and thedevelopmentofacontrolframework.Riskmanagementcannotliveinvacuum;ordertobe of thebanks'riskmandate,establishmentastructurethatprovidesforauthority,delegation,accountability, A strongorganizationalset-up,withclearlydefinedrolesandresponsibilitiespermitsahigherlevelofarticulation Decisions emanatingfromthisbasicunderstandingformthecornerstoneofourRiskManagementFramework. the levelofriskandtobeinformedreasonablyprepareddealwithanyundesiredevent/circumstances. informed ofwhatcanormayhappen,beingsteps/controlsneedtobetakenreduce/mitigate to foretellandmanageanadversefutureevent,butitbringsaboutthebasicfunctionofbeinginformed; and isascriticalinfulfillingtheinstitutes’financialobjectivesthemselves.Itsnotjustafunction The Riskmanagementfunctionhasnowtakenitsrootwithinthefinancialinstitutionsonaworld-widebasis, Risk ManagementFramework duly compliedwith.Astatementtothiseffectisannexedwiththereport. regulation relevantfortheyearended31stDecember2009havebeenadoptedbyBankand The requirementsoftheCodeCorporateGovernancesetoutbyKarachiStockExchangeinitslisting Compliance withCodeofCorporateGovernance March 04,2010. Hasan ABilgrami On behalfoftheBoard year underreview. and guidance.Wearealsothankfultoouremployees fortheirkinddedicationandcommitmentduringthe The Boardwouldliketoplaceonrecorditsdeepappreciation fortheStateBankofPakistanallassistance Acknowledgments: 31st December2010. has recommendedtheappointmentofErnst& offers themselvesforre-appointment.Asrequiredunderthe CodeofCorporateGovernance,theAuditCommittee Y oung FordRhodesSidatHyder Y oung FordRhodesSidatHyder, asauditorsfortheyearending , CharteredAccountants,retireandbeingeligible . 11 Annual Report 2009 12 Annual Report 2009 The purchaseandsaleofsharesbyDirectorsChiefExecutiveOfficerduringtheyeararegivenbelow: Hasan ABilgrami Shabir AhmedRanderee Ahmed G.M.Randeree * Alternate Director *Mr. ZaidMoosaRanderee Mr. MohamedAmiri Mr. ShabbirAhmedRanderee Mr. HasanAzizBilgrami Mr. MohammadAhmedElShall Mr. AliRazaSiddiqui Mr. AhmedG.M.Randeree Chief Justice(Retd.)MahboobAhmed Director Name Attendance ofBoardDirectorsfortheYear2008: Chief Justice(R)MahboobAhmed Name Chief Executive as at subscribed as at Designation Director & Chairman ietr5,2,8 51,423,883 51,423,883 - - 51,423,883 51,423,883 Director Director Officer No. ofShares Shares No. ofShares Dec. 31,2009 during Jan. 01,2009 ANNEXURE TODIRECTORS' REPORT 130,829 499,079 oa teddLeav Attended Total 1 6 6 6 6 6 6 6 the 1 0 5 6 5 6 4 6 - - Year Absence 499,079 130,829 e of 0 6 1 0 1 0 2 0

It istheresponsibilityofBank'smanagementto: Statement ofManagement'sResponsibility During theyear underreview effortsha Management Evaluation oftheEffecti in particular. through auditgroup/compliance&control,w function independentoflinemanagement. been establishedinordertoensureaneffecti for itsdifferentlinesofbusiness. While formulatingsuch policiesclearlineofauthorityandresponsibilityha accordance withSBP-BSDCircular No.7of2004,theBankformulatedallkeypoliciesandprocedures Marc Chief Executi Hasan A Bilgr F abov T risks facedby theBank. or loss.Ho the businessobjecti Internal controlsystemintheBankisdesignedtomanage,rather thantoeliminatetheriskoffailureac as wellsurpriseaudits. or andOnBehalfoftheBoard he BoardofDirectorsisultimatelyresponsiblefortheinternalcontrolsystemandendorses • • e managementev h 04,2010 Ev efficient working environment forobtainingdesiredobjecti Establish andmaintainanadequateeffectivesystemofinternalcontrolsproceduresfor control procedures. identifying controlobjecti wever aluate theeffecti v T ami e Officer he , itisanongoingprocessthatincludesidentification,evaluation andmanagementofsignificant A v udit CommitteeoftheBoardreviewsauditfunctionquarterlyw e, andcanonlyprovide reasonableandnotabsoluteassurance againstmaterialmisstatement aluation. v eness oftheBank'sinternalcontrolsystemthatencompassesmaterialmattersb v e, reviewingsignificantpoliciesandproceduresestablishingrelev v eness oftheBankInternalControlSystem v e beenmadeforaneffecti T he controlactivities arebeingcloselymonitoredacrosstheBank v hic e internalcontrolsystem. h co v ers allbankingactivities ingeneral andkeyriskareas v v e andefficientinternalcontrolsystem.In es. T he Bankhasestablishedanaudit hic h includesprogr hieve ant am ve y 13 Annual Report 2009 14 Annual Report 2009 11. 10. 9. 8. 7. 6. 5. No CasualvacancyoccurredintheBoardduringyear. 4. 3. 2. 1. The BankhasappliedtheprinciplescontainedinCodefollowingmanner: in compliancewiththebestpracticesofcorporategovernance. the purposeofestablishingaframeworkgoodgovernance,wherebylistedbankingcompanyismanaged G-1 ofthePrudentialRegulationsforCorporate/CommercialBankingissuedbyStateBankPakistan This statementisbeingpresentedtocomplywiththeCodeofCorporateGovernancecontainedinregulations and fullydescribedthesalient mattersrequiredtobedisclosed. The Directors’Reportforthis yearhasbeenpreparedincompliancewiththerequirement oftheCode by theCEO. Head ofInternalAuditincluding theirremunerationandtermsofconditionsemployment asdetermined The BoardapprovedappointmentsoftheChiefFinancial Officer(CFO)cumCompanySecretaryandthe shareholders. of theirdutiesandresponsibilitiesenablethemto managetheaffairsofBankonbehalf as requiredclause(xiv)oftheCodei.e.withrespect ‘Orientation Course’ofDirectorstoacquaintthem Prudential RegulationsoftheStateBankPakistanand theListingRegulationsofKarachiStockExchange Ordinance 1984,theCodeofCorporateGovernance, theBankingCompaniesOrdinance1962, The managementoftheBankhascirculatedasummary ofprovisionsvariouslawsi.e.theCompanies before themeeting.Theminutesofmeetingwereappropriately recordedandcirculated. mails oftheBoardmeetings,alongwithagendaandworkingpaperswerecirculatedatleastsevendays by theBoardforthispurpose.Sixmeetingsofwereheldduringyear.Writtennotices/e- The meetingsoftheBoardwerepresideoverbyChairmanand,inhisabsenceadirectorelected Executive OfficerhavebeentakenbytheBoard. appointment anddeterminationofremunerationtermsconditionstheemploymentChief All thepowersofBoardhavebeendulyexercisedanddecisionsonmaterialtransaction,including which theywereapprovedoramendedhasbeenmaintained. polices oftheBank.Acompleterecordparticularssignificantalongwithdateson The Boardhasdevelopedavisionandmissionstatementanoverallcorporatestrategysignificant of theDirectorsandemployeesBank. The BankhaspreparedStatementofEthicsandBusinessPracticeswhichbeensignedbymajority has beendeclaredasadefaulterbythestockexchange. payment ofanyloantoabankingcompany,DFI,orNBFIor,beingmemberstockexchange, All theresidentdirectorsofBankareregisteredastaxpayersandnonethemhasdefaultedin including thisBank. The directorshaveconfirmedthatnoneofthemisservingasadirectorinmorethantenlistedcompanies At present,theBoardincludessixnon-executivedirectorsandoneexecutivedirector. The Bankencouragesrepresentationofindependentnon-executivedirectorsonitsBoardDirectors. March 04,2010 Chief ExecutiveOfficer Hasan A.Bilgrami We confirmthatallothersmaterialprinciplescontainedintheCodehavebeencompliedwith. 20. 19. 18. 17. 16. 15. The BankhascompiledwithallcorporateandfinancialreportingrequirementsoftheCode. 14. 13. 12. observed IFACguidelinesinthisregard. services exceptinaccordancewiththelistingregulationsandauditorshaveconfirmedthatthey The statutoryauditorsorthepersonsassociatedwiththemhavenotbeenappointedtoprovideother on codeofethicsasadoptedbyInstituteCharteredAccountantsPakistan. firm andallitspartnerareincompliancewiththeInternationalFederationofAccountants(IFAC)guidelines of thepartnersfirm,theirspousesandminorchildrendonotholdsharesBankthat the qualitycontrolreviewprogramofInstituteCharteredAccountantPakistan,thattheyorany The statutoryauditorsoftheBankhaveconfirmedthattheybeengivenasatisfactoryratingunder and experiencedforthepurposesareconversantwithpoliciesproceduresofBank. The Boardhassetupaninternalauditfunction,themembersofwhichareconsideredsuitablyqualified formed, approvedbytheBoardandadvisedtoCommitteeforcompliance. results oftheBankandasrequiredbyCode.ThetermsreferenceCommitteehavebeen Four meetingsoftheAuditCommitteewereheldduringyearpriortoapprovalinterimandfinal director includingtheChairmanofcommittee. The BoardhasformedanAuditCommittee.Itcomprisesofthreemembers,allwhomarenon-executive disclosed inthepatternofshareholding. The directors,CEOandexecutivesdonotholdanyinterestinthesharesofBank,otherthanthat The financialstatementsoftheBankweredulyendorsedbyCEO&CFObeforeapprovalBoard. 15 Annual Report 2009 16 Annual Report 2009 March 04,2010 KARA the Code,foryearunderreview. not appropriatelyreflecttheBank’scompliance,inallmaterialrespects,withbestpracticescontained Based onourreview,nothinghascometoattentionwhichcausesusbelievethattheStatementdoes or not. out anyproceduretodeterminewhethertherelatedpartytransactionswereundertakenatarm’slengthprice by theBoardofDirectorsandplacementsuchtransactionsbeforeAuditCommittee.Wehavenotcarried only requiredandhaveensuredcomplianceofrequirementtotheextentapprovalrelatedpartytransactions Further, allsuchtransactionsarealsorequiredtobeseparatelyplacedbeforetheAuditCommittee.We not executedatarm’slengthprice,recordingproperjustificationforusingsuchalternatepricingmechanism. carried outontermsequivalenttothosethatprevailinarm’slengthtransactionsandwhichare of Directorsfortheirconsiderationandapprovalrelatedpartytransactions,distinguishingbetweentransactions Limited videcircularnumberKSE/N-269dated19January2009requirestheBanktoplacebeforeBoard Further, Sub-Regulation(xiiia)ofListingRegulation35notifiedbytheKarachiStockExchange(Guarantee) the Board’sstatementoninternalcontrolcoversallcontrolsandeffectivenessofsuchcontrols. carried outanyspecialreviewoftheinternalcontrolsystemstoenableusexpressanopinionaswhether internal controlsystemssufficienttoplantheauditanddevelopaneffectiveapproach.Wehavenot As partofourauditfinancialstatementswearerequiredtoobtainanunderstandingtheaccountingand with theCode. primarily toinquiryoftheBank’spersonnelandreviewvariousdocumentspreparedbyBankcomply the statusofBank’scompliancewithprovisionsCodeandreportifitdoesnot.Areviewislimited is toreview,theextentwheresuchcompliancecanbeobjectivelyverified,whetherStatementreflects The responsibilityforcompliancewiththeCodeisthatofBoardDirectorsBank.Our Corporate/Commercial BankingissuedbytheStateBankofPakistan. of BankIslamiPakistanLimited(theBank)tocomplywiththeregulationG-1PrudentialRegulationsfor of CorporateGovernance(theCode)fortheyearended31December2009preparedbyBoardDirectors We havereviewedtheStatementofCompliance(thestatement)withbestpracticescontainedinCode CHI: Ernst & Y oung F Chartered Accountants ord RhodesSidatHyder

2009. Effortsarestillinprogresstofurtherimpro efforts BankIslamiundertookafewtransactions, undertherevisedstructure,duringlastquarterofy brought certainimpro reason, ProductDevelopment andShari'ahteamofBankIslamiincoordinationwithprominentmarketpla extensiv I amthankfultothemembers ofProductDevelopment andShari'ahteamswho worked hardandtr Specialized Product Gener Follo manuals forMurabahah, Ijarah andDiminishingMusharakah productswerealsodev Case study basedMethodoftraining was introducedw Specialized Product Gener adopted duringthetraining sessions: sessions properlyandtoensurethatevery emplo established inKar W BankIslami hasgreatlyemphasizedonIslamicbankingproductstoensureShari'ahcompliancefromtheirend. Besides SystemsandSOPsemplo Islamic BankingTraining product withthename“KarobarFinancing” hasbeendeveloped forworking capitalfinancingduringthey Diminishing Musharakah andIstisnaa'productstomakethemmoreuserfriendly. Finished goodspur T post-launc BankIslami planstopresenttherevisedstructureandprocessesprominentShari'ahscholars InshaAllahafter gro reserv BankIslami Pakistan Limitedhadvoluntarily stoppedCommodityMurabahah transaction aftersomesc Product Development of focus.F in alltransactions (particularlyMurabahah tr a year ofconsolidationfor theBank.ToensureandmaintainShari'ahcomplianceofhighestpossiblestandards The year underreviewwas thefourthyear ofIslamicCommercial BankingOperations ofBankIslami.Thiswas he BankalsocarriedoutmajorrevisionofP ith ahandsomebudgetallocatedfortraining program andstateoftheart wth necessitatedanefficientbutShari'ahcompliant wing arethedetailsoftraining sessionsheldin2009: ations raised onthetransaction structure.Ho al IslamicBanking al IslamicBankingConcepts ely totrain staffmembers. ollo Methodology hing study oftheproduct. wing werethemajordevelopment oftheperiodunderreview: Type ac Tr Tr hi, LahoreandIslamabad,adetailed v ements intheexistingstructureofCommodityMurabahah transactions. After consider aining aining y ees arethemajorcontributortosuccessorfailureofany organization. ubro esoshl Stafftrained Number ofsessionsheld ansactions) intheincreasedbr olic y v ee getspropertraining. F e theprocessw y andProcedureManualsforDeposit,Murabahah, Ijar 29 6 wever hic T All Staff Staff relatedtoCorporate, Credit,CAD and reasury Productformanagementofliquidity. For this h was foundvery usefulby theparticipants. , hugeliquidityarisingfromtremendousdeposits Tr aining Calenderwas preparedtoorganizethe hic h areexpectedtobringfruitsshortlyand Target Audience ollo anc wing h netw Tr 231 762 aining Centersha Tr aining Methodologyw eloped. ork remainedthematter Audit v Training avelled e been holarly chase able yers ear. ear ah, as 17 Annual Report 2009 18 Annual Report 2009 39% and17%respecti tr Mur Review ofAssetsandLiabilities of IslamicBanking. and serviceswerecarriedout. Alhamdulillah Scholars ofJ clarifications aboutIslamicBankinganditspractical application.Extensi • Excess liquiditywas placed withIslamicbanksthroughMusharakah and approv undertaken underdirectpayment modality. Incaseofindirectpayment specificreasonwas recordedbefore that nodisbursementtakesplacewithoutappro his supervisortoensurethattheyexecutethetransaction properly. A systemhasbeenplacedw All effortsweredonetoensurethatprocessflow isdeveloped by theconcernedRelationshipManagerand • • Based ontheabove,Ireport: from J BankIslami tookasignificantstepinpromotionofIslamic Bankingindifferentcircles. A team ofIslamicSc Furtherance ofIslamicBanking remained slow duetocapitalmarketsituations,BankIslamiintendsexpandthisfunction. During theyear bankprovided Shari'ah Shari'ah Advisory • • In ordertomaintainShari'ahcompliancefollowing measuresweretaken; Shari'ah Compliance deposits arerecei On theLiabilityside,Bankisofferingremuner Mur • ansactions accountedfor44%ofthetotalfinancingw abahah, DiminishingMushar abahah transactions wereundertakenduringthelastquarter system Shari'ah of Murabahah Declaration andotherdetails. Banking products.Internal has beenexaminedontestc process flows andmanuals. All deviationsarereportedtoShari'ah department onamonthlybasis. deficiencies inthetransactions andcorrectionofthesame; and compliancec as wellspecificF and principlesofShari'ah,SBP regulationsandguidelinesrelatedtoShari'ahcompliance andotherrules As perSBPguidelinesShari'ah In my opinion,thebusinessaffairsofBankIslamiha Eac Branc Chec conform tothebasisvetted by meinaccordancewithShari'ahrulesand principles; In my opinion,theallocationoffunds,weightages, profitsharingratios andprofitrelatingtoPLSaccounts amia-tur al ofthetr h classoftransactions withrespecttotherelevant documentationandproceduresadoptedby BankIslami k onMurabahah transactions was increased. After oney hes wererequiredtomaintainandprovide 'Murabahah Surveillance andControlSheet'toShari'ah -Rasheed heldaseriesofsessionswithShari'ahandProduct Development ansaction. v ed onthebasisofQard. W A e arethankfultotheJamia who ac vely udit isdoneby Internal hec atw . All transaction weredoneunderaspecificallyappro k ofthetransactions iscarriedoutonrandom basis. as andrulingsissuedby mefromtimetotime; A akah andIstisnaa'remainedthemainmodesofCorpor udit Departmentensuresthattransactions aredoneaccordingtotheappro hec k basis; T A he excelbasedmodelhelpsinkeepingac udit hasbeenseparated fromShari'ahCompliance.Underthenew Ad visory toanIslamicfund,IGI. Although theprogressinthisarea ativ A e depositproductsonMudarabah basisandnonremuner v udit Departmentw ed processflo v kno e beengenerally carriedoutinaccordancewithrules hile Istisnaa'andDiminishingMushar amia-tur wledged effortsofBankIslamiteamintheirfatw . w -Rasheed hasissuedadetailedfatwa infa ear . MostoftheMurabahah transaction were , processflows ofallClientsarereviewed hic Ad h was extensi v W e discussionsondifferentproducts visor forreviewanddecision. akalah modes. A fewCommodity v ed transaction processflo hec T his helpedinidentifying ate financing.Mur k onthetimelysigning v ely trained inIslamic T eam toseekfurther akah stoodat hic h ensures abahah holars ative ved vor w. a. • • • • • the management: Based onreview, feedback fromandinteraction withcustomersofBankIslami, Irecommendthefollowing to Recommendations Shari'ah Irshad AhmadAijaz Ma y Allah makeoureffortssuccessful,determinationfortifiedandIslamicbankingprosperous. more focusonparticipatorymodesoffinancingisrequired; Department oftheBankshouldbeequippedwithrelevant training andSOPs; necessary informationwithcustomershouldbefocusedby theBankespeciallyCredit respect ofc ha methodology; In m Commodity Murabahah andotherinterbankmodesneedresear Although thebankhaspioneeredMudarabah financingthroughitssubsidiaryBankIslamiMudar Improv Micro finance, v e beencreditedtoc Adviser y opinion,any earningrealized fromsources orby meansprohibitedby Shari'ahrulesandprinciples ement inareaofcustomerrelationshipespeciallywithregardstocorrespondenceandsharing harity andcreditedtorelevant account. Agricultur harity account. al financeandEducationshouldbepaidattentioninfuture; An amountofRs.8.071millionw c h andimpro as recei v ement inprocessesand v ed fromcustomersin Administration abah, 19 Annual Report 2009 We have audited the annexed balance sheet of BankIslami Pakistan Limited (the Bank) as at 31 December 2009 and the related profit and loss account, cash flow statement, statement of comprehensive income and statement of changes in equity, together with the notes forming part thereof (here-in-after referred to as the ‘financial statements’) for the year then ended, in which are incorporated the unaudited certified returns from the branches except for seven branches which have been audited by us and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Bank’s Board of Directors to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with approved accounting standards and the requirements of the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984). Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and after due verification, which in case of loans and advances (financings) covered more than sixty percent of the total loans and advances (financings) of the Bank, we report that: (a) in our opinion proper books of account have been kept by the Bank as required by the Companies Ordinance, 1984 (XLVII of 1984) and the returns referred to above received from the branches have been found adequate for the purposes of our audit; (b) in our opinion: (i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984), and are in agreement with the books of account and are further in accordance with accounting policies consistently applied except for the changes in accounting policies as disclosed in note 5.1 to the accompanying financial statements, with which we concur; (ii) the expenditure incurred during the year was for the purpose of the Bank’s business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Bank and the transactions of the Bank which have come to our notice have been within the powers of the Bank; (c) in our opinion and to the best of our information and according to the explanations given to us the balance sheet, profit and loss account, cash flow statement, statement of comprehensive income and statement of changes in equity, together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan and give the information required by the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984), in the manner so required Annual Report 2009 and give a true and fair view of the state of the Bank’s affairs as at 31 December 2009 and its true balance of the loss, its comprehensive loss, its cash flows and changes in equity for the year then ended; and (d) in our opinion zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Bank and deposited in the Central Zakat Fund established under Section 7 of that Ordinance. Without qualifying our opinion, we draw attention to note 1.2 to the accompanying financial statements which states that the Bank has been granted exemption till March 31, 2010 from the requirement to have the minimum paid-up capital (free of losses) of Rs. 6.00 billion as at 31 December 2009.

Karachi March 04,2010

20 December December Note 31, 2009 31, 2008 Rupees in `000 ASSETS Cash and balances with treasury banks 8 4,217,515 2,175,413 Balances with other banks 9 2,059,550 2,207,490 Due from financial institutions 10 4,018,813 40,351 Investments 11 6,813,191 5,019,525 Financings 12 13,282,152 6,527,531 Operating fixed assets 13 2,395,304 1,910,648 Deferred tax assets 14 347,016 265,257 Other assets 15 1,153,230 942,385 34,286,771 19,088,600

LIABILITIES Bills payable 16 485,608 353,646 Due to financial institutions 17 156,160 245,939 Deposits and other accounts 18 27,987,378 12,477,955 Sub-ordinated loan - - Liabilities against assets subject to finance lease - - Deferred tax liabilities - - Other liabilities 19 917,332 819,239 29,546,478 13,896,779 NET ASSETS 4,740,293 5,191,821

REPRESENTED BY Share capital 20 5,279,679 5,279,679 Reserves - - Accumulated losses (577,246) (98,307) 4,702,433 5,181,372 Surplus on revaluation of assets - net of deferred tax 21 37,860 10,449 4,740,293 5,191,821 CONTINGENCIES AND COMMITMENTS 22

The annexed notes from 1 to 42 form an integral part of these financial statements. Annual Report 2009

Chairman Chief Executive Officer Director Director

21 December December Note 31, 2009 31, 2008 Rupees in `000 Profit / return on financings, investments and placements earned 23 2,193,891 1,468,688 Return on deposits and other dues expensed 24 1,222,169 729,528 Net spread earned 971,722 739,160

Provision against non-performing financings - net 12.8 89,780 130,556 Provision for diminution in the value of investments 11.6 15,000 - Provision against sukuk murabaha 10.5 6,418 - Bad debts written off directly - - 111,198 130,556 Net spread after provisions 860,524 608,604

OTHER INCOME

Fee, commission and brokerage income 37,854 112,117 Dividend income - 1,741 Income from dealing in foreign currencies 278,054 29,273 Capital gain / (loss) on sale of securities - net 25 2,356 31,273 Unrealised gain / (loss) on revaluation of investments classified as held for trading - - Other income 26 24,423 21,735 Total other income 342,687 196,139 1,203,211 804,743

OTHER EXPENSES

Administrative expenses 27 1,755,503 1,028,232 Other provisions / write offs - - Other charges 28 10,617 5,663 Total other expenses 1,766,120 1,033,895 (562,909) (229,152) Extra ordinary / unusual items - - LOSS BEFORE TAXATION (562,909) (229,152)

Taxation - Current (12,549) (87) - Prior years - - - Deferred 96,519 176,309 Annual Report 2009 29 83,970 176,222 LOSS AFTER TAXATION (478,939) (52,930)

Accumulated losses brought forward (98,307) (45,377) Accumulated losses carried forward (577,246) (98,307) Basic loss per share - Rupee 30 (0.91) (0.12) Diluted loss per share - Rupee 30 (0.91) (0.12)

The annexed notes from 1 to 42 form an integral part of these financial statements.

Chairman Chief Executive Officer Director Director 22 T Total comprehensi Other comprehensiveincome Loss aftertaxation he annexednotesfrom1to42formanintegr Chairman v e lossforthey Chief Executiv e Officer ear al partofthesefinancialstatements. Note Director December (478,939) (478,939) 31, 2009 Rupees in`000 - December 31, 2008 (52,930) (52,930) Director - 23 Annual Report 2009 24 Annual Report 2009 T Cash andcashequi Cash andcashequi Net increaseincashandequi Net cashflow fromfinancingacti Issue ofsharecapital C Net cashusedin Sale proceedsofpropertyandequipmentdisposedoff Inv Di Net in C Net cashflow fromoperating acti Income taxpaid Otherliabilities Depositsandotheraccounts Duetofinancialinstitutions Billspa Increase /(decrease)inoperating liabilities Othersassets(excludingad F Duefromfinancialinstitutions (Increase) /decreaseinoperating assets Deferredcostamortised Gainonsaleofpropertyandequipment-net Provision againstsukukmur Pro Provision againstnon-performingfinancings Depreciationonoperating Ijarah assets Amortisation Depreciation Adjustments: Less: Dividend income Loss beforetaxation CASH FLOWS FROMOPERATING ACTIVITIES Chairman he annexednotesfrom1to 42formanintegral partofthesefinancialstatements. ASH FLOWS FROMFINANCING ASH FLOWS FROMINVESTING vidend recei inancings estments inoperating fixedassets vision fordiminutioninthev v estments ina yable ved v v v v esting acti alents atendofthey alents atbeginningofthey ailable forsalesecurities v abaha ance taxationanddeferredcost) vities Chief Executiv e Officer vities vities alue ofin ACTIVITIES valents ACTIVITIES ear vestments ear Note Director 31 31 (11,091,369) 15,649,699 15,509,423 (1,766,494) (2,581,695) (6,873,667) (3,984,880) December 6,277,065 4,382,903 1,894,162 4,475,857 4,482,513 31, 2009 (817,702) (562,909) (562,909) (232,822) 131,962 487,092 305,284 (89,779) (75,817) 98,093 16,083 15,000 89,780 29,266 25,453 (6,656) 2,501 6,418 Rupees in`000 (192) - - - - (2,135,427) (1,152,273) (2,261,522) (2,695,220) December 1,398,270 1,398,270 1,109,403 4,382,903 4,010,657 1,115,763 3,294,032 2,543,673 Director 31, 2008 (990,641) (150,988) (230,893) (229,152) 314,146 372,246 305,772 175,939 268,648 584,686 130,556 163,211 83,253 16,019 (6,360) (1,297) (1,741) 5,746 1,741 5,657 - - - Share Accumulated Total capital loss Rupees in `000

Balance as at January 01, 2008 3,200,000 (45,377) 3,154,623

Issue of right shares during the year 1,079,679 - 1,079,679

Allotment of right shares during the year - pending issuance 1,000,000 - 1,000,000

Net loss for the year - (52,930) (52,930) Other comprehensive income - - - Total comprehensive loss for the year ended December 31, 2008 - (52,930) (52,930)

Balance as at December 31, 2008 5,279,679 (98,307) 5,181,372

Net loss for the year - (478,939) (478,939) Other comprehensive income - - - Total comprehensive loss for the year ended - December 31, 2009 - (478,939) (478,939)

Balance as at December 31, 2009 5,279,679 (577,246) 4,702,433

The annexed notes from 1 to 42 form an integral part of these financial statements. Annual Report 2009

Chairman Chief Executive Officer Director Director

25 1. STATUS AND NATURE OF BUSINESS

1.1 BankIslami Pakistan Limited (the Bank) was incorporated in Pakistan as a public limited company on October 18, 2004 under the Companies Ordinance, 1984 to carry out business of an Islamic Commercial Bank in accordance with the principles of Islamic Shariah.

The Bank was granted a 'Scheduled Islamic Commercial Bank' license on March 18, 2005, and formally commenced operations as a Scheduled Islamic Commercial Bank with effect from April 07, 2006, on receiving notification in this regard from the State Bank of Pakistan (SBP) under section 37 of the State Bank of Pakistan Act, 1956. Currently, the Bank is engaged in corporate, commercial, consumer, investment and retail banking activities.

The registered office of the Bank is situated at 11th Floor, Dolmen City, Marine Drive, Block-4, Clifton, Karachi. The Bank commenced its operations from April 07, 2006. The shares of the Bank are quoted on the Karachi Stock Exchange. The Bank is operating with 102 branches including 32 sub branches (2008: 102 branches) as at December 31, 2009. The Pakistan Credit Rating Agency (Private) Limited (PACRA) has assigned the long term credit rating of the Bank as A (“Single A”) and the short term rating as A1 (“A One”).

1.2 The State Bank of Pakistan (SBP) vide BSD Circular No. 07 of 2009 dated April 15, 2009 has increased the Minimum Capital Requirement (MCR) for Banks upto Rs 10 billion to be achieved in a phased manner by December 31, 2013. The Minimum Capital Requirement (free of losses) as of December 31, 2009 was Rs 6 billion. The paid up capital of the Bank (free of losses) as of December 31, 2009 amounts to Rs 4.702 billion. The Board of Directors, in order to comply with the enhanced capital requirement, is considering various options including but not limited to issue of right shares and acquisition options. In this connection, the Bank has already made an announcement to Karachi Stock Exchange about its decision to enter into a Memorandum of Understanding (MoU) with another Islamic Commercial Bank in relation to its merger/acquisition into/by the Bank. The Board is confident that it will meet the Minimum Capital Requirement within the stipulated time. In view of the above, the Bank has been granted an exemption till March 31, 2010 to meet the Minimum Capital Requirement by the SBP, vide its letter BSD/BAI-3/608/191/2010 dated March 3, 2010.

2. BASIS OF PRESENTATION

2.1 These financial statements have been prepared in accordance with the requirements of State Bank of Pakistan (SBP) vide BSD Circular No. 4 dated February 17, 2006.

2.2 The Bank provides financing mainly through shariah compliant financial products. Except for Murabaha transactions (which are accounted for under the Islamic Financial Accounting Standard - 1), the purchases, sales and rentals arising under these arrangements are not reflected in these financial statements as such but are restricted to the amount of facility actually utilised and the appropriate portion of rental / profit thereon. Income, if any, received which does not comply with the principles

Annual Report 2009 of Islamic Shariah is recognised as charity payable.

2.3 These financial statements are separate financial statements of the Bank in which investments in subsidiary are accounted for on the basis of direct equity interest and are not consolidated. The consolidated financial statements of the Group are being issued separately.

3. STATEMENT OF COMPLIANCE

3.1 These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance, 1984, the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan. Wherever the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan differ with the requirements of IFRS or IFAS, the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or the requirements of the said directives shall prevail.

26 .B 4. 5.1.1 SIGNIFIC 5.1 5. 3.2 5.2 . Investments 5.3 5.1.2 financial instrumentsw T been classifiedandvalued inaccordancewiththerequirementofvarious circulars issuedby SBP T T IAS 1-PresentationofFinancial Statements(Revised) except forchanges resultingfromtheadoptionoffollowing accountingstandardsasdescribedbelo follo T Change inaccountingpoliciesanddisclosure hav Disclosures” hasnotbeenmadeapplicabletobanks. Accounting Standard40,In Accounting Standard39,Financial Instruments:RecognitionandMeasurement(IAS39)International SBP videBSDCircular No.10,datedAugust26,2002hasdeferredtheapplicabilityofInternational Further Cash andcashequi Cash andcashequi b 2009, thelossbeforetaxationforyear andtotalassetswould ha applied itspreviousaccountingpolicy inrespectofIjarah contracts enteredintoonorafter01J Previously assets arerecognisedintheprofitandlossaccounto hav the assetsleasedoutunderIjarah arrangements atcostlessdepreciationandimpairment, if any w into onorafter01January 2009. As aresultofapplicationthisstandard,theBankhas recorded However of comprehensi single lineiteminthestatementofchanges inequity. Inaddition,thestandardintroducesstatement includes onlydetailsoftransactions withowners, withnon-owner changes inequitypresentedasa c sho surplus /(deficit)onrevaluation ofa issued by SBP, theBankclassifiesits in In accordancewithBSDCircular No.10and14 datedJuly 13,2004andSeptember 24,2004respecti in currentanddepositaccounts. under "profit/returnonfinancings,in contr T Adoption ofIFAS -2Ijar 'av accordingly single statement,orintwo linkedstatements. hanges inequity he accountingpoliciesadoptedinthepreparation ofthesefinancialstatementsareconsistentwiththose hese financialstatementsha he standardseparates owner andnon-owner changes inequity. he revisedstandardbecameeffecti he standardbecameeffecti y Rs29.506million. ASIS OFMEASUREMENT ailable forsale' securitiesasfollo e notbeenconsideredinthepreparation ofthesefinancialstatements.Ho wn below equityandisnottakentothestatementofcomprehensi e beenincludedunder"financings". wed inthepreparation oftheBank'sfinancialstatementsforyear ended31December2008, acts undertakenby theBank. , accordingtothenotificationofSECPdated , inaccordancewiththerequirementsofCompaniesOrdinance,1984andSBPdirecti ANT , theIjarah arrangements wereaccountedforby theBankasfinanceleases.Had , presentedprofitandlossaccountstatementofcomprehensi A v CCOUNTING POLICIES e incomew

. v valents alents compriseofcashand balanceswithtreasuryandotherbanks hic ah h ha v hic estment Property(IAS40)forBankingcompaniestillfurtherinstructions. v v v e beenpreparedunderthehistoricalcostcon e beenmarkedtomarketandarecarriedatfairvalue asstatedinnote5.3. e duringtheyear anddealswiththeaccountingforIjarah financing h presentsallitemsofrecognizedincomeandexpense,eitherinone T he standardisapplicableprospecti ws: vailable-for v v e foraccountingperiodbeginningonorafter1January 2009. v estments andplacementsearned"inthesefinancialstatements. estment portfolio into'heldfortrading', 'heldtomaturity'and T he rentalsfromIjarah anddepreciationexpenseonijar T he Bankhasadoptedtwo statementapproach and,has -sale in v April 28,2008,theIFRS7“Financial Instruments: er thetermofcontract andha Accordingly v estments isreportedunderseparate account , therequirementsofthesestandards T he statementofchanges inequity v e beendecreasedandincreased v ely forIjarah contracts entered v e incomeandstatementof v ention exceptforcertain wever v e incomesepar , in v e beenreported v estments ha anuary ately. vely, hich . ves, ah w: ve 27 Annual Report 2009 Held for trading

These are securities which are either acquired for generating profit from short-term fluctuations in market prices or dealer's margin or are securities included in a portfolio in which a pattern of short- term profit taking exists.

Held to maturity

These are securities with fixed or determinable payments and fixed maturity that the Bank has the positive intent and ability to hold to maturity.

Available for sale

These are investments that do not fall under the held for trading or held to maturity categories.

Investments are initially recognised at cost which in case of investments other than 'held for trading' includes transaction costs associated with the investment.

In accordance with the requirements of SBP, quoted securities other than those classified as held to maturity are stated at market value. Investments classified as held to maturity are carried at amortised costs less impairment, if any. Unquoted securities and investment in subsidiary are valued at cost less impairment, if any.

Surplus / (deficit) arising on revaluation of the Bank's held-for-trading investment portfolio is taken to the profit and loss account. The surplus / (deficit) arising on revaluation of quoted securities classified as available-for-sale is kept in “Surplus / Deficit on Revaluation of Securities account” and is shown in the balance sheet below equity. The surplus / (deficit) arising on these securities is taken to the profit and loss account when actually realised upon disposal.

Provision for diminution in the value of securities is made after considering impairment, if any, in their value and charged to profit and loss account.

Profit and loss on sale of investments is included in profit and loss currently.

Premium or discount on debt securities classified as available for sale is amortised using effective interest method and taken to the profit and loss account.

5.4 Trade date accounting

All 'regular way' purchases and sales of financial assets are recognised on the trade date, i.e. the date on which commitment to purchase / sale is made by the Bank. Regular way purchases or sales of financial assets are those, the contract for which requires delivery of assets within the time frame generally established by regulation or convention in the market place.

5.5 Financings

Annual Report 2009 Financings are financial products originated by the Bank and principally comprise Murabaha, Istisn'a, Ijarah, Salam, Musawamah and Diminishing Musharaka receivables. These are stated at amortised cost (except for Murabaha which is accounted for at gross receivable) net of general and specific provisions.

Provision against non-performing financing is made in accordance with the requirements of the Prudential Regulations issued by SBP and charged to profit and loss account. Specific provisions are made for identified doubtful financing in addition to general provisioning requirements. Financings are written off when there is no realistic prospect of recovery.

Murabaha to the purchase orderer is a sale transaction wherein the first party (the Bank) sells to the client/customer a Sharia compliant assets / goods for cost plus a pre-agreed profit. In principle on the basis of an undertaking (Promise-to-Purchase) from the client (the purchase orderer), the Bank purchases the assets / goods subject of the Murabaha from a third party and takes the possession thereof, however the Bank can appoint the client as its agent to purchase the assets / goods on its behalf. Thereafter, it sells it to the client at cost plus the profit agreed upon in the promise.

28 Import Murabaha is a product, used to finance a commercial transaction which consists of purchase by the Bank (generally through an undisclosed agent) the goods from the foreign supplier and selling them to the customer after getting the title to and possession of the goods. Murabaha financing is extended to all types of trade transactions i.e., under Documentary Credits (LCs), Documentary Collections and Open Accounts.

Istisn'a is an order to manufacture or construct some assets. The Bank purchases marketable / exportable goods under Istisn'a mode and sells them through an agent.

Ijarah is a contract in which the Bank buys and rents a productive asset to a person short of funds and in need of that asset.

Salam is a sale transaction where the seller undertakes to supply some specific goods to the buyer at a future date against an advance price fully paid on spot.

Musawamah is a sale transaction in which price of a commodity to be traded is bargained between seller and the purchaser without any reference to the cost incurred by the seller.

Diminishing Musharaka represents an asset in joint ownership whereby a partner promises to buy the equity share of the other partner until the title to the equity is totally transferred to him. The partner using the asset pays the proportionate rental of such asset to the other partner (the Bank).

Musharaka / Modaraba are different types of partnerships in business with distribution of profit in agreed ratio and distribution of loss in the ratio of capital invested.

5.6 Operating fixed assets

5.6.1 Property and equipment

Property and equipment are stated at cost less accumulated depreciation and impairment, if any. Depreciation is computed using the straight-line method by taking into consideration the estimated useful life of the related assets at the rates specified in note 13.2 to the financial statements. Depreciation on additions / deletions during the year is charged for the proportionate period for which the asset remained in use.

The carrying values of property and equipment are reviewed at each reporting date for indication that an asset may be impaired and carrying values may not be recovered. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property and equipment is the greater of net selling price and value in use.

Subsequent costs are included in the assets carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repair and maintenance are charged to the profit and loss account.

An item of property and equipment is derecognised on disposal or when no future economic benefits

are expected from its use or disposal. Annual Report 2009

Residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each financial year end.

Gain and loss on disposal of assets are included in profit and loss currently.

5.6.2 Capital work in progress

These are stated at cost less impairment, if any.

5.6.3 Intangible assets

These are stated at cost less accumulated amortisation and impairment, if any. Amortisation is charged over the useful life of the asset on systematic basis to income applying the straight line method at the rate specified in note 13.3 to the financial statements.

29 Amortisation on additions is charged from the month in which the assets are put to use while no amotisation is charged in the month in which the assets are deleted.

Software and other development costs are only capitalised to the extent that future economic benefits are expected to be derived by the Bank.

The carrying amounts are reviewed at each balance sheet date to assess whether they are recorded in excess of their recoverable amounts, and where carrying values exceed estimated recoverable amount, assets are written down to their estimated recoverable amount.

5.7 Taxation

5.7.1 Current taxation

Provision for taxation is based on the taxable income for the year determined in accounts with the prevailing laws for taxation on income. The charge for tax also includes adjustments, where considered necessary relating to prior years.

5.7.2 Deferred taxation

Deferred tax is provided using the balance sheet liability method on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and un-absorbed tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and un-absorbed tax losses can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or subsequently enacted at the balance sheet date.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

The Bank also recognizes deferred tax asset / liability on deficit / surplus on revaluation of assets which is adjusted against the related deficit / surplus in accordance with the requirements of IAS 12 'Income Taxes'.

5.8 Staff retirement benefits

5.8.1 Defined benefit plan

The Bank operates an approved and unfunded gratuity scheme for all of its permanent employees. The contribution to the scheme is made on the basis of actuarial recommendations. Actuarial valuation is carried out at each year end using the Projected Unit Credit Method. Actuarial gains and losses are recognised as income or expense over the average remaining working lives of the employees, if the

Annual Report 2009 net cumulative unrecognised actuarial gains or losses for the Scheme at the end of the previous financial year exceed 10% of the higher of defined benefit obligation and the fair value of the plan assets.

5.8.2 Defined contribution plan

The Bank operates an approved funded contributory provident fund scheme for all of its permanent employees. Equal monthly contributions are made both by the Bank and the employees at the rate of 10 percent of the basic salary. The Bank has no further payment obligations once the contributions have been paid. The contribution made by the Bank is recognised on employee benefit expense when they are done.

5.9 Revenue recognition

5.9.1 Profit from Murabaha is accounted for on consummation of Murabaha transaction. However, profit on the portion of revenue not due for payment is deferred by accounting for unearned Murabaha income with a corresponding credit to deferred Murabaha income which is recorded as a liability. The same is then recognised as revenue on a time proportionate basis.

30 5.9.2 Profit from Istisn'a, Diminishing Musharaka, Salam and Musawamah are recognised on a time proportionate basis.

5.9.3 Profit from Ijarah contracts is recognised on a pattern reflecting a constant periodic return on the net investment outstanding in accordance with International Accounting Standard 17 “Leases”.

Profit from Ijarah contracts entered on or after January 01, 2009 is recognized in the profit and loss account over the term of the contract net of depreciation expense relating to the Ijarah assets.

5.9.4 Profit on Diminishing Musharaka is recognised on an accrual basis.

5.9.5 Provisional profit of Musharaka / Modaraba financing is recognised on accrual basis. Actual profit / loss on Musharaka and Modaraba financings is adjusted for declaration of profit by Musharaka partner / modarib or at liquidation of Musharaka / Modaraba.

5.9.6 Profit on classified financing is recognised on receipt basis.

5.9.7 Dividend income is recognised when the right to receive dividend is established.

5.9.8 Gains and losses on sale of investments are included in profit and loss currently.

5.9.9 Fee on issuance of letter of credit and acceptance is recognised on receipt basis as generally the transaction consummates within an accounting period. Fee on guarantees, if considered material, is recognised over the period of guarantee.

5.10 Financial instruments

5.10.1 Financial assets and financial liabilities

Financial assets and financial liabilities are recognised at the time when the Bank becomes a party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual right to future cash flows from the asset expire or is transferred along with the risk and reward of the asset. Financial liabilities are de-recognised when obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on de-recognition of the financial asset and liabilities is recognised in the profit and loss account of the current period.

5.10.2 Offsetting of financial instruments

Financial assets and financial liabilities are only offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set-off the recognised amounts and the Bank intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

5.10.3 Derivatives

Derivative financial instruments are recognised at fair value. In the case of equity futures, the fair value is calculated with reference to quoted market price. Derivatives with positive market values (unrealised

gains) are included in other receivables and derivatives with negative market values (unrealised losses) Annual Report 2009 are included in other liabilities in the balance sheet. The resultant gains and losses are taken to profit and loss currently.

5.11 Related party transactions

Transactions with related parties are at arm's length prices except for transactions with executives that are undertaken in accordance with their terms of employment.

5.12 Foreign currencies

Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the Bank operates. The financial statements are presented in Pakistani Rupees, which is the Bank's functional and presentation currency.

31 32 Annual Report 2009 .6Impairment 5.16 5.15 Provisions 5.14 F 5.13 5.17.1 5.17 T T Deferred costs is statednetoffexpectedreco and reasonablecertaintyexistsfortheBanktosettleobligation.Chargeprofitlossaccount Pro are reviewedateach balancesheetdateandareadjustedtoreflectthecurrentbestestimate. to settletheobligationandareliableestimatecanbemadeofamountobligation.Pro past event anditisprobablethatanoutflow ofresources embodying economicbenefitswillberequired Pro Assets heldinafiduciarycapacityarenottreatedasassetsoftheBankfinancialstatements. ruling onthebalancesheetdate. of guarantee denominatedinforeigncurrenciesareexpressedrupeetermsattherates ofexc are translated atcontracted rates. Contingentliabilities/commitmentsforlettersofcreditand Commitments foroutstandingforward foreignexchange contracts disclosedinthesefinancialstatements Commitments Tr Tr using forward exchange rates applicabletotheirrespecti T at theexchange rates prevailing atthebalancesheetdate.F the dateoftransaction. Monetaryassetsandliabilitiesinforeigncurrenciesaretranslated intorupees Foreign currency transactions aretranslated intolocalcurrency attheexc Foreign currency transactions assets arewrittendown totheirreco If such indicationexists,andwhere thecarryingamountexceedsestimatedreco of changes incircumstances indicatethatthecarryingamountofassetsmay notbereco medium enterprises. It includesretailfinancings, depositsandbankingservicesofferedtoitsretailcustomers andsmall Retail Banking It includesequity, foreignexchanges, commodities,own securitiesandplacements. Tr Business Segments segments. (geogr (business segment)orinproviding productsorserviceswithinaparticular economicen A segmentisadistinguishablecomponentoftheBankthat isengagedinproviding productsorservices Segment reporting profit andlossaccount. iduciary assets hese representpreliminary, formationandpre-operating costandexpensesincurredonissueofshares. he carryingamountofassetsisreviewedateach balancesheetdateforimpairmentw hese arebeingamortisedo anslation gainsandlossesareincludedintheprofitlossaccount. anslation gainsandlosses ading andSales visions forguarantee claimsandotheroffbalancesheetobligationsarerecognisedwhen intimated vision arerecognisedwhen theBankhasapresentlegalorconstructi aphical segment),w T he Bank'sprimaryformatofreportingisbasedonbusiness segments. hic v er aperiodoffi veries. h issubjecttorisksandrewards thataredifferentfromthoseofother ver able amounts. v e y ears. T v he resultingimpairmentlossistakentothe e remainingmaturities. orw ard exchange promisesare rev v e obligationasaresultof hange r ates prevailing on ver henev able amount, vironment er ev verable. visions hange alued ents Commercial Banking

It includes project finance, export finance, trade finance, Ijarah, guarantees and bills of exchange relating to its corporate customers.

5.17.2 Geographical Segments

The Bank has 102 (2008: 102) branches / sub branches and operates only in Pakistan.

5.18 Assets acquired in satisfaction of claims

The Bank occasionally acquires assets in settlement of certain financings. These are stated at lower of the net realizable value of the related advances and the current fair value of such assets.

6. Accounting standards not yet effective

The following revised standards, amendments and interpretations with respect to approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation.

Standard or interpretation Effective date (accounting periods beginning on or after)

IAS 24 - Related Party Disclosures (Revised) January 01, 2011

IAS 27 - Consolidated and Separate Financial Statements (Amendment) July 01, 2009

IAS 32 - Financial Instruments: Presentation - Classification of Rights February 01,2010 Issues (Amendment)

IFRS 2 - Share-based Payments: Amendments relating to Group January 01, 2010 Cash-settled Share-based Payment Transactions

IFRS 3 - Business Combinations (Revised) July 01, 2009

IFRIC 14 -IAS 19 - The Limit on Defined Benefit Assets, Minimum January 01, 2011 Funding Requirements and their Interaction (Amendments)

IFRIC 17 - Distributions of Non-cash Assets to owners July 01, 2009

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments July 01, 2010

The Bank expects that the adoption of the above revisions, amendments and interpretations of the

standards will not materially effect the Bank's financial statements in the period of initial application. Annual Report 2009

In addition to the above, amendments to various accounting standards have also been issued by the IASB as a result of its annual improvement project in April 2009. Such improvements are generally effective for accounting periods beginning on or after 01 January 2010. The Bank expects that such improvements to the standards will not have any material impact on the Bank's financial statements in the period of initial application.

7. Significant accounting judgments and estimates

The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Bank's accounting polices. Estimates / judgments and associated assumptions used in the preparation of the financial statements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

33 The estimates / judgments and associated assumptions are reviewed on an ongoing basis. Revision to the accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The changes in estimate made during the year and impact on the financial statements are disclosed in note 12.8.1. The estimates, judgments and assumptions that have significant effect on the financial statements are as follows: Note Classification of investments 5.3 & 11 Useful lives of assets and methods of depreciation / amortisation 5.6 & 13 Deferred taxation 5.7.2 & 14 Provision against non-performing financings 5.5 & 12.7 Defined benefit plan 5.8.1 & 33

December December Note 31, 2009 31, 2008 Rupees in `000 8. CASH AND BALANCES WITH TREASURY BANKS

In hand - local currency 829,014 933,924 - foreign currencies 117,355 95,300 With State Bank of Pakistan in 946,369 1,029,224 - local currency current accounts - foreign currency deposit accounts 8.1 2,564,617 781,475 - Cash Reserves 29,484 11,469 - Special Cash Reserves 35,803 13,842 - US Dollar Clearing Account 23,205 8,846 8.2 88,492 34,157 With National Bank of Pakistan in 3,599,478 815,632 - local currency current accounts 618,037 330,557 4,217,515 2,175,413

8.1 Includes Rs. 2,302.563 million (2008: Rs. 490.766 million) held against Cash Reserve Requirement and Statutory Liquidity Requirement which is to be maintained to comply with the requirements of SBP issued from time to time. Balance amount is available to the Bank for its operations.

8.2 Includes Rs. 63.506 million (2008: Rs. 23.35 million) held against Cash Reserve Requirement and Special Cash Reserves Requirement. Balance amount is available to the Bank for its operations. These deposits do not carry any return.

December December Note 31, 2009 31, 2008 Annual Report 2009 Rupees in `000 9. BALANCES WITH OTHER BANKS

In Pakistan - on current accounts 16,015 9,806 - on deposit accounts 9.1 1,539,014 2,099,942 1,555,029 2,109,748 Outside Pakistan - on current accounts 504,521 89,832 - on deposit accounts - 7,910 504,521 97,742 2,059,550 2,207,490

9.1 Represents deposits with various Islamic commercial banks under Musharaka and Modaraba arrangements with maturities less than 3 months. The expected profit rates on these arrangements ranges between 5 % and 9.5 % (2008: 13 % and 13.5 %) per annum.

34 December December Note 31, 2009 31, 2008 Rupees in `000 10. DUE FROM FINANCIAL INSTITUTIONS

Sukuk Murabaha 10.1 6,418 40,351 Commodity Murabaha - local currency 10.2 2,218,813 - 10.3 2,225,231 40,351 Musharaka Placement 10.4 1,800,000 - 4,025,231 40,351 Provision against Sukuk Murabaha 10.5 (6,418) - 4,018,813 40,351

10.1 The Bank entered into Sukuk Murabaha arrangement under which the Bank appoints its client as an agent under asset purchase agreement to purchase the underlying Sukuks from the open market on its behalf and later sells them on deferred Murabaha basis. This carries profit at the rate of 16.75% (2008: 16.75%) per annum.

10.2 The Bank has entered into Commodity Murabaha agreements under which the Bank purchases an underlying commodity from open market through an agent and sells it to a financial institution on credit with profit. The profit rate on the Commodity Murabaha ranges between 11.5% and 12.4% (2008:nil) per annum and have a maturity ranging from 2 days to 18 days. December December Note 31, 2008 31, 2007 Rupees in `000 10.3 Murabaha sale price 25,898,652 1,197,413 Purchase price (25,850,000) (1,165,000) 48,652 32,413 Deferred Murabaha income

Opening balance 582 11,765 Deferred during the year 48,652 32,413 Recognised during the year (42,232) (43,596) 7,002 582 Murabaha receivable

Opening balance 40,351 625,037 Sales during the year 25,898,652 1,197,413 Received during the year (23,713,772) (1,782,099) 2,225,231 40,351

10.4 The Bank has entered into Musharaka Placement arrangements under which the profit rate ranges from Annual Report 2009 12.35% to 12.50% (2008: Nil) per annum and have a maturity ranging from 2 days to 4 days.

10.5 This represents provisioning in respect of Sukuk Murabaha arrangement with an investment bank undertaken on November 17, 2008. The maturity date of the deal was February 08, 2009. The total murabaha arrangement amounts to Rs 28.5 million against which Rs 22.1 million was received during the year. The Bank is making efforts to recover the balance outstanding, however on the basis of the Bank has made a provision for against the outstanding balance. December December Note 31, 2009 31, 2008 Rupees in `000 10.6 Particulars of due from financial institutions

In local currency 4,018,813 40,351 In foreign currency - - 4,018,813 40,351

35 36 Annual Report 2009 12Investments by segments 11.2 Investments by types 11.1 INVESTMENTS 11. T Surplus onrevaluation ofa Inv Less: provision fordiminutioninvalue ofin T -MutualFunds Other in -Sukukcertificates Participation T -Unlistedsubsidiarycompan Fully paidupordinaryshares: -Sukukcertificates Federal go T a Surplus onrevaluation of Inv Less: provision fordiminutionin T - Unlistedcompan Subsidiary Closedendmutualfund Openendedmutualfunds - MutualFunds - SukukCertificates Av otal in otal in otal in otal in erm F ailable forsalesecurities v estments -netofpro estments -netofpro ailable forsalesecurities and impairment Closed endmutualfund Open endedmutualfunds v v v alue ofin inance Certificates,Debentures,Bondsand estments atmarketv estment atcos v v estments atmarketv estments atcost vestments v ernment securities: vestments y T erm Certificates: t vision alue vision v ailable forsalesecurities alue Note 21.1 11.6 11.5 11.4 11.4 11.3 y 6,813,191 6,754,944 6,769,944 6,578,929 6,578,908 the Bank Held by 191,015 (15,000) 58,247 15 vestments 6 collateral December Given as 31, 2009 ------6,813,191 6,754,944 6,769,944 6,578,929 6,578,908 191,015 Total (15,000) 58,247 Rupees in`000 Note 21.1 11.6 11.4 11.4 11.3 11.5 11.3 15 6 5,019,525 5,003,450 5,003,450 4,812,435 4,812,435 the Bank Held by 191,015 December 6,813,191 6,754,944 6,769,944 4,328,908 2,250,000 31, 2009 16,075 191,015 (15,000) 58,247 Rupees in`000 - - - collateral 15 Given as December 31, 2008 6 ------December 31, 2008 4,562,435 5,003,450 5,003,450 5,019,525 191,015 250,000 5,019,525 5,003,450 5,003,450 4,812,435 4,812,435 16,075 - - 191,015 Total 16,075 - - - - 11.3.5 11.3.4 11.3.3 11.3.1 11.3.2 Name oftheinvesteecompany Details ofinvestmentSukuk 11.3 date ofissue. in September2012. plus 175basispoints)recei T be repaidonmaturity. that thesecurityandrentalpur During they December 31,2009,thesehadamarketvalue ofRs.311,610thousand(2008:259,487thousand). 40 basispoints)recei T Gov be redeemedineightsemi-annualinstallmentsstarting fromMay 2012. some ofwhom ha issuer itselfintheFIRhasconcededthatafraud was committedinitsofficeby certainemplo discrepanc Rental dueonOctober22,2009,was notpaidtotheBankonpleathatthereexistscertain and oncompletionofthetransaction weretransferred totheBank’s CDCaccount. A periodicIjar million. anegotiatedtransaction foracashconsideration ofRs.50.228millionhaving facevalue ofRs.50 At December31,2009,thesehadamarketvalue ofRs.674,154thousand(2008:Rs.676,700 thousand). 40 basispoints)recei T be repaidonmaturity 35 basispoints)receivableonsemi-annualwithmaturityinOctober2012. These carryprofitattherate ofsixmonthsKIBORplus35basispoints(2008: from thefirstdr be repaidin12equalsemi-annualinstallmentwithfirst installmentfallingdueonthe54thmonth minus 25basispoints)recei T lodged aformalcomplaintwithitsSharia’hBoard. misrepresentation, willfulomissionofmaterialfactandoutrightdeceptionasthefirststephas financial statements. Additionally theBankisalsoevaluating legaloptionsagainstthesellerforgross is certainthatitwillbeabletoreco P KSEW Sukuk-2 KSEW Sukuk-1 Second First WAPD Sukuk Certificates Ijarah GOPSukuk-3 Ijarah GOPSukuk Haq BahuSugarMillSukuk-2 Haq BahuSugarMillSukuk-1 Three StarHosierySukuk HBFC Sukuk LESCO Sukuk Optimus Sukuk Eden Developers Sukuk Eden HousingSukuk Kohat CementSukuk Sui SouthernGasCompany Sukuk New Allied Electronics(LG)Sukuk Sitara EnergySukuk-2 Sitara EnergySukuk-1 Third Sitara Chemicals Sukuk Second Sitara Chemicals Sukuk Shahmurad SugarMillsSukuk Security LeasingSukuk Engro ChemicalSukuk Amtex Sukuk ak ElectronSukuk hese carryprofitattherate ofthreemonthsKIBOR plus175basispoints(2008:threemonthsKIBOR hese carryprofitattherate ofsixmonthsKIBOR plus40basispoints(2008:sixmonthsKIBOR hese carryprofitattherate ofsixmonthsKIBORplus40basispoints(2008: sixmonthsKIBORplus hese carryprofitattherate ofsixmonthsKIBORminus25basispoints (2008:sixmonthsKIBOR ernment ofPakistan's So W APD A Sukuk T hese certificateswerea A Sukuk y withrespecttoownership oftheasset. ear awdo , theBankpur v e beenarrestedandpartofthemoneyha T wn date. v v here isanearlypur . able onsemi-annualbasiswith maturityinNo able onsemi-annualbasiswithmaturityinNo T T he rentalsarebacked by Go he rentalsarebac 11.3.26 11.3.25 11.3.24 11.3.23 11.3.22 11.3.21 11.3.20 11.3.19 11.3.18 11.3.17 11.3.16 11.3.15 11.3.14 11.3.13 11.3.12 11.3.11 11.3.10 v 11.3.9 11.3.8 11.3.7 11.3.6 11.3.5 11.3.4 11.3.3 11.3.2 11.3.1 Note able quarterlybasedonDiminishing Musharaka mechanism withmaturity v v c able onsemi-annualbasiswithmaturityinJuly 2017. T ereign Guar hased 10,000certificatesonJune 25,2009of he rentalsarebacked by Go v ailable intheseller’s Central DepositoryCompany (CDC)account 134,000 20,000 10,000 15,000 42,000 50,000 40,000 50,000 27,000 84,000 11,000 10,000 65,000 59,000 60,000 92,800 38,000 60,000 c 2009 2,500 4,000 5,000 8,000 2,000 hased throughCDCisdeemedtobelegallybonafideandthe v 250 - - Certificates Number of er therentalthereforenoprovision hasbeenmadeinthese c antee. hase optiona ked by Go 134,000 10,000 10,000 15,000 15,000 42,000 50,000 40,000 50,000 27,000 84,000 11,000 10,000 50,000 59,000 60,000 92,800 38,000 50,000 2008 2,500 4,000 5,000 8,000 2,000 250 - v T v 1,000,000 ernment ofPakistan's So (Rupees) he Bankandthelegaladvisers areoftheview ernment ofPakistan's So 100,000 100,000 Value Face v 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 ailable totheissuerafter30 monthsfromthe v ernment ofPakistan's So v e beenreco 6,578,908 2,000,000 250,000 210,000 229,167 100,000 218,750 130,410 420,000 250,000 321,574 295,000 257,143 464,000 190,000 668,238 299,213 2009 Cost 50,000 67,500 55,000 20,000 10,413 40,000 25,000 7,500 Rupees in`000 - - v v ember 2015. ember 2015. v ered. 4,812,435 T WAPD 250,000 210,000 250,000 200,000 250,000 130,410 420,000 250,000 250,000 295,000 300,000 464,000 190,000 670,000 250,112 Cost he rentalsarebacked b 2008 50,000 50,000 75,000 75,000 55,000 20,000 20,413 40,000 37,500 10,000 v T ereign Guar v he Bankslegalad - ereign Guarantee. A– ISukukthrough v T T T T ereign Guar W he principalwill he principalwill he principalwill he principalwill Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Default ithdr 2009 BBB- BBB- AA- AA- AA AA A+ A+ Instrument rating A- A- A A - - awn antee. W Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Unrated Default antee. ithdr BBB+ yees, 2008 AA- AA- visor AA AA A+ A+ A- A- A A A ah awn At y 37 Annual Report 2009 11.3.6 These carry profit at the rate of three months KIBOR plus 200 basis points (2008: three months KIBOR plus 200 basis points) receivable quarterly based on Diminishing Musharaka mechanism with maturity in October 2012. There is an early purchase option available to the issuer after 2 years from the date of issue.

11.3.7 These carry profit at the rate of six months KIBOR plus 150 basis points (2008: six months KIBOR plus 150 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in September 2015. Upto two consecutive, equal semi-annual installments, the first such installment falling due on the 90th month from the date of the first contribution under the facility.

11.3.8 These carry profit at the rate of six months KIBOR plus 195 basis points (2008: six months KIBOR plus 195 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in September 2012. The principal to be redeemed in eight equal semi-annual installments commencing from the 18th month from the issue date.

11.3.9 These carry profit at the rate of six months KIBOR plus 225 basis points (2008: six months KIBOR plus 225 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in September 2012. There is an early purchase option available to the issuer after 2 years from the date of issue.

11.3.10 These carry profit at the rate of three months KIBOR plus 170 basis points (2008: three months KIBOR plus 170 basis points) receivable quarterly based on Diminishing Musharaka mechanism with maturity in December 2012. There is an early purchase option available to the issuer after 2 years from the date of issue.

11.3.11 These carry profit at the rate of three months KIBOR plus 100 basis points (2008: three months KIBOR plus 100 basis points) receivable quarterly based on Diminishing Musharaka mechanism with maturity in December 2012. There is an early purchase option available to the issuer after 3 years of disbursement with `No Early Payment Penalty’.

11.3.12 These carry profit at the rate of six months KIBOR plus 195 basis points (2008: six months KIBOR plus 195 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in July 2012. The principal with be redeemed in ten equal semi-annual installments commencing from the 6th month from the date of issue.

11.3.13 These carry profit at the rate of six months KIBOR plus 195 basis points (2008: six months KIBOR plus 195 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in July 2012. The principal will be redeemed in ten equal semi-annual installments commencing from the 6th month from the date of issue.

11.3.14 These carry profit at the rate of three months KIBOR plus 220 basis points (2008: three months KIBOR plus 220 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in December 2012. There is an early purchase option available to the issuer after 2 years of disbursement.

11.3.15 These carry profit at the rate of three months KIBOR plus 20 basis points (2008: three months KIBOR

Annual Report 2009 plus 20 basis points) receivable quarterly based on Diminishing Musharaka mechanism with maturity in December 2012. There is an early purchase option available to the issuer after 1 year of disbursement.

11.3.16 These carry profit at the rate of six months KIBOR plus 180 basis points (2008: six months KIBOR plus 180 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in June 2013.

11.3.17 These carry profit at the rate of six months KIBOR plus 250 basis points (2008: six months KIBOR plus 250 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in December 2012. There is an early purchase option available to the issuer after 2 years of disbursement.

11.3.18 These carry profit at the rate of three months KIBOR plus 300 basis points (2008: three months KIBOR plus 300 basis points) receivable quarterly in arrears based on Diminishing Musharaka mechanism with maturity in May 2010.

38 11.3.19 These carry profit at the rate of six months KIBOR plus 125 basis points (2008: six months KIBOR plus 125 basis points) receivable quarterly based on Diminishing Musharaka mechanism with maturity in April 2015. The principal will be repaid in 24 consecutive quarterly units. The first such unit falling due not later than the end of fifteen months from the last drawdown.

11.3.20 These carry profit at the rate of six months KIBOR plus 90 basis points (2008: six months KIBOR plus 10 basis points) receivable semi-annually. The first payment shall fall due at the end of six months from the issue date with maturity. The principal will be repaid at maturity in April 2010.

11.3.21 These carry profit at the rate of six months KIBOR plus 100 basis points (2008: six months KIBOR plus 100 basis points) receivable semi-annually and the first such profit payment will fall due from the six months from the issue date with maturity in May 2014.

11.3.22 These carry profit at the rate of three months KIBOR plus 325 basis points (2008: three months KIBOR plus 325 basis points) receivable semi annually based on Diminishing Musharaka mechanism. The first payment fall due at the end of six months from the issue date and subsequently after every six months thereafter. The sukuks were fully matured during the year.

11.3.23 These carry profit at the rate of six months KIBOR plus 325 basis points (2008: six months KIBOR plus 325 basis points) receivable semi-annually, the first profit payment shall fall due at the end of six months from the issue date and subsequently after every six months thereafter based on Diminishing Musharaka mechanism with maturity in August 2011.

11.3.24 These carry profit at the rate of three months KIBOR plus 350 basis points (2008: three months KIBOR plus 350 basis points) receivable quarterly, the first profit payment shall fall due at the end of three months from the issue date and subsequently after every three months thereafter, based on Diminishing Musharaka mechanism. The sukuks were fully matured during the year.

11.3.25 The profit rate on these sukuks comprises of six months weighted average yield of six month market T-Bills plus 45 basis points. The principal will be redeemed on maturity in September 2011. These are backed by Government of Pakistan Sovereign Guarantee. At December 31, 2009, these had a market value of Rs. 252,482 thousand.

11.3.26 The profit rate on these sukuks comprises of six months weighted average yield of six month market T-Bills. The principal will be redeemed on maturity in March 2012. These are backed by Government of Pakistan Sovereign Guarantee. At December 31, 2009, these had a market value of Rs. 2,040,000 thousand.

11.4 Details of investments in Mutual Funds

2009 2008 2009 2008 2009 2008 2009 2008

Name of the investee Fund Number of Mark value Cost Entity rating Long Units (Rupees in '000) (Rupees in '000) term/short term

Units Open ended mutual funds Al Meezan Cash Fund 99 - 5 - 5 - AA (f) - Meezan Islamic Fund 107 - 5 - 5 - 3 Star - Meezan Islamic Income Fund 97 - 5 - 5 - A+ (f) - Annual Report 2009 15 15 Closed end mutual fund Meezan Balanced Fund 1,000 - 6 - 6 - AM2 - 21 - 21 - -

11.5 Details of investment in unlisted subsidiary Holding Book COST % value per 2009 2008 share Rupees in `000 BankIslami Modaraba Investments Limited Chief Executive Mr. Zulfiqar Ali 8,000,000 (2008: 8,000,000) Ordinary shares of Rs.10/- each 100 18.36 191,015 191,015 Book value per share is based on the reviewed financial statements for the half year ended December 31, 2009.

39 40 Annual Report 2009 22Murabahasaleprice 12.2 12.1 P 11.6.1 Particularsofprovision fordiminuitioninvalue ofinvesmtents 11.6 -General -Specific Provision fornon-performingfinancings inPakistan FINANCINGS 12. Closing balance Reversals Charge fortheyear Opening balance Mur Recognised duringthey Deferred duringthey Opening balance Deferred murabaha income Purchase price Sukuk certificates- Received duringthe year Sales duringthe year Opening balance Financings -netofprovision Financings -gross underIFAS 2 Net bookvalue ofassets/investmentinIjarah Net investmentIjarah financings - Financings toemployees - Musawamah - Against Bills-Musawama - Against Bill-Mur - DiminishingMusharaka -Others - DiminishingMushraka -Housing - Istisn'a - Mur F articulars ofprovision inrespectoftypeandsegment inancings -inP Islamic ExportRefinanceSc Istisn'a IncludesfinancingsamountingtoRs.42.020million(2008:nil)againstunder Murabaha underIslamicExportRefinanceScheme. Murabaha includesfinancingsamountingtoRs.169.186million(2008:254.54million)against abaha recei abaha vable akistan abaha A v ear ailable forsalesecurities ear heme. 12.4 &12.9 12.1 &12.2 Note 12.7 12.6 12.5 12.1 13,282,152 13,531,861 12,114,632 (5,882,021) (7,445,953) December December 4,180,471 7,698,756 2,363,736 7,698,756 31, 2009 31, 2009 1,230,034 3,889,569 2,824,849 4,180,471 (259,075) (230,928) 252,803 252,803 187,195 300,052 150,000 761,743 (18,781) 81,312 87,584 15,000 15,000 15,000 15,000 7,948 Rupees in`000 Rupees in`000 - - - December December (4,507,004) (6,034,051) 2,363,736 6,289,235 6,289,235 31, 2008 31, 2008 6,527,531 6,687,460 1,791,430 4,896,030 1,457,729 2,363,736 (205,644) 581,505 255,184 255,184 (141,687) 200,664 682,141 184,797 87,584 38,044 (18,242) 3,387 3,576 ------12.7 IjarahAssets 12.6 Net investmentIjarah financings 12.5 12.3.2 In localcurrency 12.3.1 Particularsoffinancings 12.3 12.4 Loss Doubtful Substandard Category ofclassification non-performing statusasfollows: Financings includesRs.788.665million(2008:186.093million)whichhavebeenplacedunder Vehicles Plant andMachinery Ijar Present value ofminimum Future rentalincome Minimum Ijarah payments Residual value Ijarah rentalsreceivable Long-term (foro Short-term (foruptooney In foreigncurrenc Loss Doubtful Substandard Category ofclassification T under Bank'sHumanResource P his includesRs.1.609million(2008:0.939million)markupfreefinancingtoemplo ah pa yments v er oney y January 01, Domestic Domestic ear) Not later than one 788,665 363,181 142,878 282,606 186,093 122,866 (102,452) ear) 503,202 605,654 588,673 12,059 51,168 2009 As at year 16,981 Classified Financings Classified Financings - - - olicy. Overseas Overseas Additions / (deletions) Later than five years (228,233) less than one and 726,832 955,065 302,297 652,768 216,461 155,105 COST 61,356 ------December 31, 2009 788,665 363,181 142,878 282,606 186,093 122,866 12,059 51,168 Total Total December Over five 01, 2009 216,461 155,105 years As at 61,356 - - - - - Domestic Domestic 230,928 134,913 141,687 122,866 50,501 45,514 12,792 January 01, 1,230,034 1,560,719 1,241,441 6,029 (330,685) 319,278 2009 As at Total Provision Required Provision Required Rupees in`000 Rupees in`000 Rupees in`000 Rupees in`000 - - - December December December Overseas Overseas 31, 2009 31, 2009 31, 2008 DEPRECIATION Impairment Charge / ------29,266 20,873 8,393 Not later than one (123,508) 259,001 382,509 382,509 year 230,928 134,913 141,687 122,866 50,501 45,514 12,792 Total Total 6,029 - 13,531,861 13,531,861 13,531,861 December December 01, 2009 4,928,619 8,603,246 31, 2009 29,266 20,873 As at 1,532,429 1,834,508 1,469,483 Later than 8,393 five years less than (302,079) one and 365,025 Domestic Domestic Rupees in`000 230,928 134,913 141,687 122,866 December 50,501 45,514 12,792 31, 2008 6,029 - value asat December Provision Held Provision Held Over five 31, 2009 187,195 134,232 52,963 years Book Overseas Overseas y ees ad December - - - - - 6,687,460 3,808,405 2,879,055 6,687,460 6,687,460 31, 2008 ------1,791,430 2,217,017 1,851,992 (425,587) vanced depreci- ation % 20-33.33 20-33.33 Rate of 230,928 134,913 141,687 122,866 365,025 Total 50,501 45,514 12,792 Total Total 6,029 41 Annual Report 2009 42 Annual Report 2009 28P 12.8 29P 12.9 Effect ofchange inaccountingestimate 12.8.1 12.7.1 283P 12.8.3 12.8.2 118.662 million). other persons Bank oran F Closing balance Reversals Charge fortheyear Opening balance In foreigncurrency In localcurrency respect ofprovisioning againstnon-performingad The SBP, videBSDCircular No.10,datedOctober20,2009,hasamendedPrudentialRegulationsin hav Included inlosscategoryareassetsamountingtoRs.218.981million(2008:118.662million)which 40 percent ofF of theprudentialregulationsforconsumerfinancingissuedby SBPandforpotentiallossesonfinancings. T performing financingsandaconsequentdecreaseinlossbeforetaxationby Rs.124.553million. c FSV ofpledgedstocks andmortgagedcommercial andresidentialproperties. performing financings.Previously, theBankswereonlyallowed totakethebenefitof30percent of industrial propertyheldascollateral by theBankindeterminingamountofprovision againstnon- articulars ofprovision againstnon-performingfinancings articulars offinancingstodirectors, articulars ofprovisions againstnon-performingfinancings inancings dueb hange inregulationhasresultedareductionprovisioning ofRs.124.553millionagainstnon- he Bankhasmaintainedageneral reserve (provision) inaccordancewiththeapplicablerequirements e beenclassifiedundersubjecti F Balance atbeginningofy Balance atendofy Repayments associated companiesetc. inancing gr y ofthemeithersev or y directors,executi ced Sale anted duringthey ear V alue (FSV)ofpledgedstocks andmortgagedcommercial, residentialand 230,928 179,550 141,687 230,928 230,928 Specific Specific (90,309) er ear 89,241 ally orjointlywithan v ear e ev - v es orofficersofthe aluation, resultinginaprovision ofRs.64.411million(2008: General General 18,781 18,242 18,781 18,781 2009 2009 539 539 - - v ances. 249,709 180,089 159,929 249,709 249,709 y (90,309) 89,780 Total Total Rupees in`000 Rupees in`000 T he revisedregulationsallo - 141,687 121,402 137,961 141,687 141,687 Specific Specific (16,559) 20,285 December 31, 2009 300,052 138,269 200,664 - (38,881) Accordingly Rupees in`000 9,154 9,088 General General 18,242 18,242 18,242 2008 2008 9,154 - - w thebenefitof December 31, 2008 , theabo 200,664 128,827 112,592 159,929 130,556 147,115 (40,755) 159,929 159,929 (16,559) 29,373 Total Total - ve Vehicles computer equipments Electrical, officeand Furniture andfixture Building onleaseholdland Vehicles computer equipments Electrical, officeand Furniture andfixture Building onleaseholdland Free holdland Property andequipment 13.2 13.1 OPERATINGFIXEDASSETS 13. Property andequipment Capital w Intangible assets Property andequipment Capital work-in-progress Ad Equipments v ances tosuppliersandcontr ork-in-progress ,0,8 2,5 ,1,6 601132 5,2 1,661,035 254,226 163,21 96,041 1,915,261 920,254 1,004,482 ,1,6 3,7 ,4,6 5,2 0,8 5,4 2,289,816 557,944 305,284 254,226 2,847,760 936,374 1,915,261 January 01, January 01, 6,8 6,354024,3 2411647397,595 126,447 82,481 44,030 524,042 361,63 162,487 175927,941 127,509 23,039 108,345 5,1 9,1 4,3 6773,1 883500,508 48,823 32,116 16,707 549,331 391,919 157,412 0,2 2,1 3,4 9893,4 105682,528 51,015 31,146 19,869 733,543 124,917 608,626 478,354 638,611 820,477 298,298 116,829 92,554 171,851 68,006 126,447 41,539 48,823 776,652 51,015 252,610 755,440 913,031 524,042 206,109 179,488 549,331 733,543 5974,8 0,4 54517,468 15,435 108,345 41,788 75,957 2009 2008 As at As at 7,2 275,128 275,128 - Additions / Additions / (deletions) (deletions) COST COST (9,475) (9,400) (3,875) (3,875) actors (75) December December 01, 2009 31, 2008 As at As at January 01, January 01, 2009 2008 As at As at Rupees in`000 Rupees in`000 Note December December 13.3 13.2 13.1 31, 2009 31, 2008 - - DEPRECIATION DEPRECIATION (deletions) (deletions) Charge / Charge / 23,888 (5,026) (4,962) (1,566) (1,566) (64) December December December 01, 2009 31, 2008 2,395,304 2,289,816 31, 2009 As at As at 50,263 27,941 105,147 Rupees in`000 275,128 - 341 341 341 - value asat value asat December December 31, 2009 31, 2008 80,404 77,246 Book Book December 1,910,648 1,661,035 31, 2008 230,240 190,592 230,240 39,648 19,373 depreci- depreci- ation % ation % Rate of Rate of 25 20 10 20 25 10 5 5 - 43 Annual Report 2009 44 Annual Report 2009 DEFERRED TAXASSETS 14. Thefollowingassetsweredisposed-offduringtheyear: Details ofpropertyandequipment disposed-off 13.4 Additions representIslamicBankingSoftwareandLicenseacquiredduringtheyear. 13.3.1 Computer software Computer software 13.3 13.2.1 Suzuki Liana Vehicles Total Toyota Corolla Suzuki Mehran Suzuki Cultus Toyota Corolla Intangible assets from thecarryingamount. The fairvalueofpropertyandequipmentasperthemanagementestimatesisnotmateriallydifferent 14.2 Provision againstnon-performing financings Pro Minimum taxcreditcarried forw A Deferred taxdebitsarisinginrespectof Surplus onrev Amortisation ofdeferredcost Ijar Acceler Deferred taxcreditsarisingdueto v ailable taxlosses ah financings vision againstin ated taxdepreciation 3313,0 1,2 4,3 3852,5 928105,147 39,288 25,453 13,835 144,435 111,227 33,208 13.3.1 Note aluation ofassets Disposal Book Accumulated Original ,7 ,6 ,0 2,501 2,309 1,566 3,875 1,018 1,082 rcesofdisposal proceeds alue v depreciation cost 709 430 636 ------(Rupees'000)------v January 01, January 01, estment andsukukmurabaha 7076113,0 ,7 ,5 38519,373 13,835 5,657 8,178 33,208 6,141 27,067 2009 2008 As at As at Bn oiy–COHasanAzizBilgrami EFUGeneralInsuranceLtd Bank Policy–CEO Bank Policy– Insurance Claim 424 246 450 818 424 158 254 594 811 272 382 271 Additions Additions 47 COST COST ard December December 31, 2009 31, 2008 6 563 662 As at As at January 01, January 01, 2009 2008 As at As at Rupees in`000 Rupees in`000 December December oe2009 Note AMORTISATION AMORTISATION 31, 2009 31, 2008 Charge Charge Sarwar Imam Employee Auction Auction Mode December December 31, 2009 31, 2008 (407,980) (273,854) (109,108) (20,387) As at As at 347,016 754,996 720,042 (4,631) 10,134 17,324 7,496 Rupees in'000 Bank IslamiModarabaLtd Mr. ImranSheikh P articulars ofbuy value asat value asat December December 31, 2009 31, 2008 Book Book (284,512) (195,056) 265,257 549,769 491,162 (82,960) 2008 53,832 (5,626) ers 4,775 (870) amortisat amortisat Rate of Rate of ion % ion % - 20 20 16. 15.3 15.2 15.1 otherprepa O 15. 14.2 14.1 Outside P In P BILLS P Includes Rs.nil(2008:190.781million)inrespectofpayment tovarious banksagainstletterofcredits. Balance attheendofy Less: Amortised duringthey Balance atthebeginningofy Deferred costs Represents ad Adv Other recei Car ijarah repossession Insur Deferred costs Branc to deferredtaxassetsasreportedinthesefinancialstatements. impact ofthesameamountingtoRs10.134millionhasbeencarriedforward andtreatedasaddition of such provisions relatingtopriorperiodsw No. 01/2010dated13January 2010ofICAP onthesubjectmatter, isconfidentabouttheallo amendments. Ho regard totheprovision fornon-performingfinancingsmadepriortotheapplicabilityofabo T sheet exposuresapplicablefromtaxyear 2010(accountingyear 31December2009)andonw Act 2009regardingtaxallo During they tax assetscouldberealised. y as statedinnote5.7.2above. The abovenetdeferredtaxassethasbeenrecognisedinaccordancewiththeBank’s accountingpolicy ear he saidamendmentsmadeinthetaxlaw donotexplicitlyprovide foratransitional mechanism with THER akistan ance taxation(payments lesspro , estimatesthatsufficienttaxableprofitsw ance claimrecei Adv Adv Profit /returnaccruedinforeigncurrenc Profit /returnaccruedinlocalcurrenc h adjustmentaccount AYABLE ASSETS ance againstfinancings ances, deposits,ad akistan vables ear v ance gi , amendmentswerebroughtintheIncome wever yments vable v en inrespectofMurabaha andIjarah financings. , theBankuponopinionofitstaxadvisor andintheviewofCir ear v w ear ance rentand ability ofprovision againstnon-performingfinancingsandoffbalance T he managementbasedonfinancialprojectionspreparedduringthe ear vision) y y hic ould bea h approximatestoRs28.954million,hencethetax v ailable infutureagainstw T oe2009 Note oe2009 Note Note 15.1 15.3 15.2 ax Ordinance,2001throughtheF 1,153,230 485,608 485,608 397,285 546,166 16,083 20,169 36,252 92,476 16,980 64,025 12,169 20,169 3,960 2009 Rupees in'000 Rupees in'000 Rupees in'000 - - - hic h thisdeferred 353,646 353,646 159,113 153,600 342,394 942,385 199,261 2008 2008 16,019 36,252 52,271 22,873 11,048 14,816 36,252 wability 2,951 2008 inance cular ards. 77 - ve 45 Annual Report 2009 46 Annual Report 2009 81Particularsofdeposits 18.1 DEPOSITS AND OTHER ACCOUNTS 18. 17.3 Particulars ofduetofinancialinstitutions 17.2 17.1 DUE TOFINANCIAL INSTITUTIONS 17. In foreigncurrencies In localcurrency Non remunerative deposits Remunerative deposits Financial institutions Margin accounts–non-remunerative Current accounts–non-remunerative Savings deposits Fixed deposits Customers collateral. expected profitrate ranges from6.5%to7.0%(2008:6.5%)perannumandaresecuredagainst Represents Musharaka contributionsby SBPagainstIslamicExportRefinanceScheme. Thesecarry Long term Short term In foreigncurrencies In localcurrenc respect tocurrencies P outside Pakistan In Pakistan articulars ofduetofinancialinstitutionswith y oe2009 Note oe2009 Note 17.3 27,987,378 27,987,378 27,410,046 27,513,175 12,652,075 7,265,287 7,555,064 577,332 272,358 201,845 156,160 156,160 156,160 156,160 156,160 156,160 40,749 Rupees in'000 Rupees in'000 - - - 12,477,955 12,477,955 12,265,687 12,402,442 2,865,180 2,846,686 6,500,115 212,268 190,461 245,939 245,939 245,939 245,939 245,939 245,939 2008 2008 75,268 245 - - - Issued, subscribedandpaidupcapital 20.2 20.1 SHARE CAPITAL 20. 19.1.2 19.1.1 Charity fund 19.1 9 OTHERLIABILITIES 19. 2,6,9 527,967,898 527,967,898 2,6,9 427,967,898 527,967,898 - Opening balance 320,000,000 527,967,898 Authorised capital at any timeduringtheyear. Charity was notpaidtoany individual /organisationinwhichadirectororhisspousehadany interest During theyear,managementpaidcharity ofRs.nil(2008:2.763million). 600,000,000 Balance attheendofyear Payment /utilizationduringtheyear Additions duringtheyear Balance atthebeginningofyear Pay Others Withholding taxpayable Retention money Charity payable Sundry creditors Security depositsagainstIjarah Unearned rent Payable todefinedcontributionplan Deferred Murabaha Income–CommodityMur Deferred Mur Accrued expenses Unearned feesandcommission Profit /returnpa Profit /returnpayableinlocalcurrenc able todefinedbenefitplan 092008 2009 2008 2009 Number ofshares Number ofshares - Shares pendingissuance 100,000,000 - - Issued duringtheyear 107,967,898 - abaha Income–F y 0,0,0 OrdinarysharesofRs.10/- 600,000,000 able inforeigncurrenc inancings Fully paidincash Ordinary sharesofRs.10each Each y y bh 10.3 abaha oe2009 Note 19.1 12.2 33 ,7,7 5,279,679 5,279,679 ,7,7 4,279,679 5,279,679 ,7,7 3,200,000 5,279,679 6,000,000 917,332 382,822 185,512 110,714 2009 2009 37,411 27,601 11,929 51,957 81,312 8,071 6,219 1,852 7,002 4,831 8,071 1,096 1,187 5,887 Rupees in'000 Rupees in'000 Rupees in'000 - - 1,000,000 - 1,079,679 - 6,000,000 819,239 379,357 130,104 2008 2008 2008 (2,763) 18,820 52,560 28,539 35,925 10,358 87,584 62,972 1,852 1,791 2,824 2,178 1,852 2,294 6,096 582 18 47 Annual Report 2009 48 Annual Report 2009 PROFIT /RETURNONFINANCINGS, 23. Other commitments 22.6 Commitments inrespect offinancingfacilities 22.5 fixed assets Commitments forthe acquisitionofoperating 22.4 Commitments inrespect ofpromises 22.3 22Transaction-related contingentliabilities 22.2 Trade-related contingentliabilities 22.1 22. 21.1 SURPLUS ONREVALUATIONOF ASSETS –NETOF DEFERRED 21. On financingsto: INVESTMENTS AND PLACEMENTS EARNED On Investmentsinaailableforsalesecurities Others On deposits/placementswith financialinstitutions Bills forcollection withdrawn. revocable commitmentsdonotattract any significantpenaltyorexpenseifthefacilityisunilaterally The Bankmakescommitmentstoextendfinancingsinthenormalcourseofitsbusinessbutthesebeing Sale Purchase - Others - Government - Banks Guarantees favoring Acceptances Import lettersofcredit CONTINGENCIES AND COMMITMENTS Less: Relateddeferredtaxliability Sukuk Certificates Surplus onrev • Financial institutions • Customers TAX aluation ofa v ailable forsalesecurities oe2009 Note oe2009 Note 1,070,568 1,021,395 2,193,891 (20,387) 894,868 218,381 177,235 141,141 643,793 353,063 49,173 10,074 16,848 98,079 37,860 58,247 1,726 8,099 Rupees in'000 Rupees in'000 - 1,468,688 767,414 717,268 555,423 139,101 107,126 104,597 426,740 245,000 426,982 405,055 2008 2008 50,146 32,744 10,449 (5,626) 16,075 6,750 3,670 - 72Amortisation 27.2 7 ADMINISTRA 27. 71A 27.1 26. 5 CAPIT 25. RETURN ONDEPOSITS AND OTHER DUESEXPENSED 24. Deferred costs Intangible assets Salaries, allo Out-of-poc T Special certificationsandsundryadvisory services Review ofhalfyearly financialstatements A Others V F Remuner Trav Broker Security servicec Entertainment expense CDC andshareregistrar services Amortisation Depreciation A Adv Stationery andprinting Repairs andmaintenance Communication Legal andprofessionalc Rent, taxes,insurance andelectricity Insur Non-executiv Contribution todefinedcontributionplan Charge fordefinedbenefitplan Others Gain ondisposalofpropertyandequipment-net Gain onterminationofIjar Rent onproperty O Sukuk certificates Mutual fundunits Shares –Listed Deposits Other short-termduetofinancialinstitutions ees andsubscription ax services ehicle runningandmaintenance udit fee uditors’ remuner uditors’ remuneration THER INCOME ertisement andpublicity elling andcon ance onconsumercarijar AL GAINONSALEOFSECURITIES age andcommission ation toShariahBoard ket expenses w e directors’fees TIVE EXPENSES ances andotherbenefits harges veyance ation harges ah financing ah oe2009 Note 15.2 13.3 27.2 13.2 27.1 33 1,755,503 1,210,677 1,222,169 531,431 305,284 106,064 292,320 41,536 16,083 25,453 47,505 31,603 30,315 69,664 11,787 13,882 41,536 58,405 43,204 82,578 10,972 23,348 20,851 18,709 24,423 13,473 11,492 1,500 6,079 5,628 2,736 1,350 2,736 6,568 4,190 2,356 2,356 210 451 400 252 175 192 Rupees in'000 - - 1,028,232 335,305 163,211 160,958 710,177 729,528 2008 21,676 16,019 18,739 19,701 16,636 33,711 15,760 21,676 41,265 23,756 57,576 43,276 22,346 13,410 21,735 12,531 31,273 23,771 19,351 5,657 1,300 9,546 6,086 3,621 2,030 8,145 1,350 9,879 2,030 1,297 6,074 1,833 1,975 5,527 186 175 300 249 69 49 Annual Report 2009 50 Annual Report 2009 2 STAFFSTRENGTH 32. 0 BASIC AND DILUTEDLOSSPERSHARE 30. 1 CASH AND CASH EQUIVALENTS 31. 30.1 9 T 29. 8 OTHERCHARGES 28. Total staffstrength Temporary /oncontractual basis Permanent Loss fortheyear section 177oftheOrdinance. The returnofincomefiledby theBankfortaxyear 2008hasbeenselectedfortaxauditunder relevant accountingyears. completed undertheprovisions oftheprevailing incometaxlaw asapplicable inPakistan duringthe of incomeforthetaxyears 2006,2007,2008and2009onduedates.Thesaidreturnsweredeemed Under Section114oftheIncomeTaxOrdinance,2001(theOrdinance),Bankhasfiledreturns presented inthesefinancialstatementsduetotaxablelossduringtheyear. The numericalreconciliationbetweenaverage taxrate andtheapplicabletaxrate hasnotbeen - Deferred - Current For theyear Weighted average numberof Balances withotherbanks Cash andbalanceswithtreasurybanks above. for issueofshares.Accordingly,dilutedlosspershareisequaltothebasicasreported There isnodilutioneffectonthebasiclosspershareasBankhasoutstandingcommitments Basic losspershare30.1 ordinary shares Others Penalties imposedby theState BankofPakistan AXA TION Note Rupees in‘000 Number Rupee oe2009 Note oe2009 Note oe2009 Note 527,967,898 6,277,065 2,059,550 4,217,515 (478,939) (12,549) 2009 83,970 96,519 10,617 (0.91) 1,471 1,063 4,247 6,370 408 Rupees in'000 Rupees in'000 Rupees in'000 Number 421,895,427 4,382,903 2,207,490 2,175,413 176,222 176,309 (52,930) 2008 2008 2008 2008 1,188 (0.12) 5,663 5,435 402 786 (87) 228 ofthey DEFINED BENEFITPLAN 33. Unrecognised actuarialgains /lossesattheendofy Actuarial lossrecognised Subtotal Actuarial gainsonobligation Unrecognised actuariallossesatthebeginning Unrecognised actuariallosses Actuarial losstoberecognised Aver Excess Unrecognised actuariallossesasatthebeginningof y Whic 10% ofplanassets 10% ofobligations T Corridor limit Actuarial losstoberecognised Closing balance Actuarial gain Benefit paid F Current servicecost Opening balance Mov Closing balance Benefits paid Expense forthey Opening balance Mov Actuarial lossrecognised F Current servicecost Amounts charged toprofit andlossaccount: Liability recognisedinthebalancesheet Net actuarialgains/(losses)notrecognised Present value ofdefinedbenefitobligation T T eligible forsuch benefitsafter 3years ofservice. members tolumpsumpayment atthetime ofretirement,resignationordeath.Permanent staffare The Bankhasagratuity scheme foritsemplo General description inance cost inance cost he limitsofthecorridoratbeginningyear /period he presentvalue ofobligationunderthescheme atthebalance sheetdatewereasfollo he numberofemplo age expectedremainingworking li ement inthepresentvalue ofdefinedbenefitobligation: ement intheliabilityrecognisedbalancesheet: h works outto ear ear y ees co v ered underthefollowing definedbenefitscheme are833(2008:349) v es iny y ears ees (membersofthesc ear ear oe2009 Note heme). (2,928) 34,755 15,845 19,092 37,411 18,709 18,820 18,709 15,845 37,411 34,755 2,656 2,656 2,928 1,909 1,909 2,864 2,864 2,656 (272) (272) (118) (118) T Rupees in'000 he sc 14 - - - - - heme entitlesthe ws: 2008 19,092 10,150 18,820 18,820 19,092 1,015 1,015 1,015 8,864 9,879 9,521 9,879 1,015 8,864 (272) (272) (629) (629) (357) (580) (580) (272) 357 15 - - - - - 51 Annual Report 2009 52 Annual Report 2009 6 FAIRVALUEOFFINANCIAL INSTRUMENTS 36. 35.2 35.1 COMPENSATIONOFDIRECTORS AND EXECUTIVES 35. DEFINED CONTRIBUTIONPLAN (PROVIDENT FUND) 34. in thenatureor inthecaseofcustomerfinancing anddepositsarefrequently repriced. not significantly differentfromtheircarrying values sinceassetsandliabilities areeithershort-term In theopinionofmanagement, thefairvalue oftheremaining financialassetsandliabilitiesare The repricingandmaturityprofile andeffectiverates arestatedinnote40tothesefinancial statements. to thefinancialstatements. financing havebeencalculatedinaccordance withtheBank’s accountingpolicy as statedinnote5.5 and reliabledataregarding marketrates for similarinstruments.Theprovisions forimpairmentof calculated withsufficientreliabilityduetoabsenceofcurrent andactivemarketforassetsliabilities Fair value offixed-termfinancing,otherassets,liabilitiesanddepositscan notbe market priceexceptforunquotedinvestmentwhichiscarriedatcost. The fairvalue oftheinvestmentsotherthanthoseclassifiedasheldtomaturity isbasedonquoted maintained carsinaccordancewiththeBanksservice rules. The Bank'sPresident/ChiefExecutiveandcertain ves areprovided withfreeuseofBank's Executive asbonus. In additiontotheabove,anamountofRsnil(2008: Rs.8 million)waspaidtothePresident/Chief Number ofPersons Medical Utilities Rent andhousemaintenance Contribution todefinedcontributionplan Salary inlieuofprovidentfund Charge fordefinedbenefitplan Bonus- 13.410 million)each. contribution by employerandeesduringtheyear amountedtoRs.20.851million(2008: employee bothcontribute10%ofthebasicsalarytofundedscheme every month.Equalmonthly The Bankoperates acontributoryprovident fundscheme forpermanentemployees.Theerand Managerial remuneration Fees Experience adjustmentonplanliabilities Deficit Historical information: Fair value ofplanassets Present value ofdefinedbenefitobligation As atDecember31 V Expected rate ofincreaseinsalarylevel Principal actuarialassumptionsusedareasfollows: aluation discountrate 0920 0920 092008 2009 2008 2009 2008 2009 President /Chief 3801,4 ,5 ,5 7,4 151,770 171,243 1,350 1,350 12,449 13,800 ,8 8,785 9,781 Executive 7 878 878 270 978 878 978 760 270 978 815 1 - - - 1 - - ,5 1,350 1,350 - (2,928) 34,755 34,755 ------2009 oe2009 Note Rupeesin'000 - Directors ------(Rupees in'000)------4 ------90210,150 19,092 90210,150 19,092 2008 (357) 14% 12% 0 98 107 4 0099,243 9,243 25,770 6,595 10,079 10,079 5,987 28,142 - 9,659 - - 6,669 - - - - 0,1 92,432 106,615 - Rupees in'000 - Executives 2,500 - 2008 (505) 2007 15% 15% - - - 8 RELATEDPARTYTRANSACTIONS 38. SEGMENT DETAILS WITH RESPECTT 37. Return ondepositsexpensed Profit earnedonfinancing Transactions, incomeandexpenses: At theendofyear Acquisition ofvehicle Withdrawal duringthey ear Deposit duringtheyear At thebeginningofyear Deposits: At theendofyear Repaid duringtheyear Disbursed duringtheyear At thebeginningofyear Financings: SUBSIDIARY follows: including ChiefExecutiveOfficerunderthetermsofemployment asdisclosedinnote33are Transactions withrelatedpartiesotherthanremuneration andbenefitstokeymanagementpersonnel their closefamilymembersandstaffretirementfunds. management personnel,companieswhere directorsoftheBankalsoholddirectorship,and The relatedpartiesoftheBankcomprisegroupcompanies,principalshareholders,key Segment costoffunds(%) Total income 2008 Segment returnonnetasset(ROA)(%) Segment liabilities Segment provisionrequired Segment nonperformingloan Segment assets(gross) Net income/(loss) Total expenses Segment costoffunds(%) Segment returnonnetasset(ROA)(%) Segment liabilities Segment provisionrequired Segment nonperformingloan Segment assets(gross) Net income/(loss) Total expenses Total income 2009 T he segmentanalysiswithrespecttobusinessactivity isasfollo O BUSINESS 12223240375559119,248,131 5,585,941 2,460,327 11,202,263 70712358211,6,5 34,557,898 3,015,157 13,962,555 (1,163,449) 3,568,241 (444,319) 17,027,102 (1,407,749) Trading & Tr ,1,0 ,7,2 ,0,4 13,896,778 4,305,045 2,173,229 7,418,504 1,440,031 (126,991) ading & Sales Sales 934,104 807,113 6,1)(7,8)(0,8)(850,803) (609,480) (179,185) (21,418) (61,418) 12.34% 10.21% 222(1,0)(9,1)(478,939) (291,318) (219,903) 32,282 (3.4%) ,0 ,3,5 3462329,546,477 23,406,213 6,133,159 7,105 0.2% 1753 5,1)(159,930) (186,093) (52,417) (63,622) (107,513) (122,471) - - A CTIVITIES Banking Banking Banking Banking Commercial Retail Commercial Retail 0,8 7,6 1,717,758 1,664,828 576,869 603,982 206,785 253,733 8,8)(6,2)(271,127) (164,726) 2,536,578 (84,983) 872,131 224,416 12.34% 10.21% 46,949 16.4% (8.9)% Rupees in'000 Rupees in'000 ws: (621,796) 632,165 2009 10,726 12.34% 10.21% 8,430 27,113 (3.1)% 2.1% 829 357 Rupees in'000 - - - - - (559,821) (189,000) 315,355 244,823 189,000 2008 Total Total 201,053 4,526 357 131 - - - 53 Annual Report 2009 54 Annual Report 2009 92 CapitalStructure 39.2 ScopeOfApplications 39. 1 CAPIT AL ASSESSMENT AND ADEQUACY 39. entities andsignificantminority investmentsentitiesengaged inbankingandfinancialactivities. investments and50%deductionvintheequityofsubsidiary forincompaniesbeingcommercial and netun-appropriatedprofits, etcafterdeductionsfordeficitonrevaluation ofavailableforsale Tier 1capital,whichincludesfullypaidupgeneral reserves asperthefinancialstatements Tier 1capital Bank’s regulatorycapitalisanalyzedintothreetiers II isseparately calculatedanddisclosedintheconsolidatedfinancialstatements oftheGroup. Pakistan Limited.Thecapitalassessmentandadequacy oftheGroupfinancialstatementsunderBasel- The BaselIIFramework isapplicableatthelevel ofstandalonefinancialstatementsBankIslami Disposal ofvehicle (Note13.4) Return ondepositsexpensed Profit earnedonfinancing Transactions, incomeandexpenses: Contribution toEmployeesProvident Fund Contribution toEmployeesGratuity Fund Employee BenefitPlans: At theendofyear Withdrawal duringtheyear Deposit duringtheyear At thebeginningofyear Deposits: At theendofyear Repaid duringtheyear Disbursed duringtheyear At thebeginningofyear Financings: KEY MANAGEMENTPERSONNEL At thebeginningofyear Deposits: ASSOCIATES Tr At theendofy Withdra Deposit duringtheyear Disposal ofvehicle (Note13.4) Return ondepositsexpensed ansactions, incomeandexpenses: w al duringthey ear ear (326,931) (49,118) (10,075) 364,904 2009 20,851 18,709 49,526 48,796 15,000 43,871 35,386 73,359 1,018 2,002 1,082 3,114 126 731 323 Rupees in'000 (494,747) (15,460) 493,484 2008 (6,812) 13,410 43,871 19,101 40,230 36,649 35,386 1,509 9,879 6,930 4,949 323 205 9 - - 39.3 Others Fixed Assets Investment Claims onBanks Retail Portfolio Corporate Portfolio –non marketrelated P Past duefinancings Mortgage Portfolio Corporate Portfolio P Credit Risk below: T Capital T T Less: Costofin Eligible Rev totalriskweightedassets Gener T Less: Bookvalue ofgoodwill andintangibles Less: Costofin T Regulatory CapitalBase on capitaladequacy areasfollo T for the in entitiesengagedbankingandfinancialacti in theequityofsubsidiarycompaniesbeingcommercial entitiesandsignificantminorityin 45% ofthebalance,foreignexchange translation reserves, etc after50%deductionforin weighted assets),reserv Tier 2capital,whichincludesgeneral provisions forloanlosses(uptoamaximumof1.25%risk Tier 2capital T T ortfolios subjecttooffbalancesheet exposure ortfolios subjecttostandardizedapproach (Simple) otal RegulatoryCapital otal ier 3capitalhasalsobeenprescribedby theStateBankofPakistan. Ho ier IICapital ier ICapital ier 3capital he capitalrequirementsfortheBankaspermajorriskcategoriesisindicatedinmannergi he riskweightedassetstocapitalratio, calculatedinaccordancewiththeStateBank'sguidelines aluation Reserve (upto45%) Accumulated loss Shareholders Capital T al provisions subjectto1.25%of ier IICapital T Adequacy T ier 3capital. ier IIICapital v v estment insubsidiary-50% estment insubsidiary-50% es onrev ws: aluation offixedassetsandequityin vities. 1,580,086 229,016 241,061 899,125 2473,5 2,7 366,167 524,270 32,955 52,427 96,013 55,207 35,008 24,656 2009 Capital Requirements - (a) 1,045,775 171,958 190,391 106,267 442,911 77,865 27,111 25,546 3,725 2008 v Rupees in'000 estments uptoamaximumof wev 4,451,262 4,501,778 4,702,433 5,279,679 (105,147) (577,246) (95,508) (50,516) (95,508) 2009 26,211 18,781 15,800,860 er theBankisnoteligible 2,290,157 2,410,612 8,991,248 960,128 552,073 350,083 246,559 Rupees in'000 2009 - Risk - W eighted 4,989,225 5,066,491 5,181,372 5,279,679 11,619,726 (95,508) (77,266) (19,373) (95,508) (98,307) vestments vestments 1,910,647 2,115,454 1,180,745 4,921,234 2008 18,242 865,171 301,237 283,847 41,391 Assets 2008 ven - - 55 Annual Report 2009 56 Annual Report 2009 40. 39.4 Standardized important areasofthebanking business,andco whic including Credit,Market,Liquidity, Operational etc. acti Risk Managementistheprocess ofmanaginguncertaintiesthatarisesinthenormal courseofbusiness RISK MAN its riskweightedexposures. of theriskweightedexposureBank. Oper Equity Risk b paid upcapital(freeoflosses)forBanks/Development Finance Institutionstoberaised toRs.10billion T In addition,theBankwas alsorequiredtomaintainaminimumCapital Requirement withinthestipulatedtime. merger/acquisition into/bytheBank.TheBoardisconfident thatitwillmeettheMinimumCapital Memorandum ofUnderstanding(MOU)withanother IslamicCommercialBankinrelationtoits has alreadymadeanannouncementtoKarachiStockExchangeaboutitsdecisionenterintoa including butnotlimitedtoissueofrightsharesandacquisitionoptions.Inthisconnection,theBank Directors, inordertocomplywiththeenhancedcapitalrequirement,isconsideringvariousoptions Requirement bytheSBP,videitsletterBSD/BAI-3/608/191/2010datedMarch3,2010.TheBoardof However, theBankhasbeengrantedanexemptiontillMarch31,2010tomeetMinimumCapital The paidupcapitaloftheBank(freelosses)asDecember31,2009amountstoRs4.702billion. billion paidupcapital(freeoflosses)by theendoffinancialyear 2009. Planning Horizonandbeabletotakead capital ratios tosupportbusinessandmaximizeshareholdervalue and4)tooperate withaRev regulatory MinimumCapitalRequirement(MCR)2)maintainastrongcreditrating 3)maintainhealth Our objecti Capital Management T T Capital Operational Risk Capital Requirementforoperational risks TOTAL Capital Requirementforportfoliossubjectto Market Risk Interest RateRisk Foreign ExchangeRisk otal Risk otal eligibleregulatorycapitalheld Capital he StateBankofPakistan throughitsBSDCircular No.07dated April 15,2009requirestheminimum y theyear endingDecember31,2013. vities. Italsoencapsulesrisk/reward trade-off. ational Risk h commensurate's wellwithourcurrentsize andstructure. Adequac Adequac W AGEMENT Approac v eighted Assets es forasoundcapitalmanagementare:1)toensurethattheBankcomplieswith y Ratio y Ratio h T v he raise istobeac antage ofnewin T he BankCAR asatDecember31,2009was 20.39%of v ers awidespectrumoffinancial businessriskcategories; 2,182,594 T 462,436 450,003 he functionofriskmanagement isoneofthemost 87,645 12,429 2009 Capital Requirements T he Bankfollows aneffecti 4 v (a) /(b) hiev estment opportunitieswhen theyappear (b) (a) 1,127,340 ed inaphasedmannerrequiringRs.6 46,931 1,679 1,679 2008 Rupees in'000 - - 21,825,938 Adequac 4,451,262 2009 21,825,938 20.39% 4,624,362 4,500,034 876,446 124,286 Rupees in'000 y Ratio(CAR) of10% 2009 v Risk WeightedAssets 42 e riskgo 12,526,012 4,989,225 12,526,012 vernance 2008 521,460 39.83% 18,659 18,659 olving 2008 - - y . T integr T - is atthefurthestfromequator from thecenteronroleofriskmanagementinglobalcrisisrecentpast,division no effectiveness intheglobalfinancialmarkets. While financialmanagersatthetimewereclearlydi During thelastcoupleofyears riskmanagementhasweatheredalotofcriticismwithrelationstoits T tow At strategic level, theriskrelatedfunctionsareappro Str better riskanalysisability - - Management F needs tobereinforced throughastrongcontrolculturethatpromotessoundriskgo A wellformulatedpolicy andprocedureiscriticalforaneffecti RISK MAN with regulatoryandBanksown internalpoliciesha requirement inthisrespect,andconductsitsbusinessaccordingly. Risk-exposurelimitsincompliance effectiv delegation andaccountability, anddevelopment ofcontrolfr of articulationtheBanksriskmandate,establishment ofastructurethatprovides forauthority A strongorganizationalset-up,withclearlydefinedroles andresponsibilitiespermitsahigherlev RISK ORGANIZA remains thehealthofportfolios. in avacuum; inordertobeeffecti resour T RISK APPETITE OF THE B includes thebusinesslineacquisition,strongadherencetocreditandotherrelatedcriteria. and understanding,canbeofmaximumbenefittotheorganization.Microlevel riskmanagement Risk managementatmicrolevel, isofcriticalimportance. Micro Lev resilience oftheportfolio. category management activities performedby middlemanagementorunitsdevoted toriskreviewsfallintothis It encompassesriskmanagementwithinabusinessareaoracrosslines.Generally therisk Macro Lev over str T Banks objecti management policiesandprocedures, withanexplicitaimtomitigate/managerisk inlinewiththe Liability Committee)andMCC (ManagementCreditCommittee)manageand adhere totherisk T involv his approach isprimarilybasedonaviableportfoliobuild-upwithlong-termview; keyconsider he riskmanagementfunction attheBank,alongwithdifferentcommitteesincluding ALCO (Asset hese include;definingrisks,settingparameters, ascertaininginstitutionsriskappetite,formulating he riskappetiteoftheBankisanoutcomeitscorporate goal,economicprofitability, a he BankisalsocommittedtothefullandatimelyimplementationofBaselII(B2)w ategy andpoliciesformanagingrisksestablishingadequatesystemscontrolstoensurethat ategic Lev ards itsbusinessobjecti all riskremainswithinacceptablelevel andthereward compensates'fortherisktaken. Ev communication withintheBank. Critical DecisionMakingshouldbebasedonrelevant resear ated riskmanagement. o beeffecti e allrelevant parties. ces andmostsignificantly, itscontrols. ely provide forarisk-basedcapitalapproach. Currently, theBankadherestoregulatory ery lossornearmissevent shouldprovide someKLO(Key LearningOutcome),developing a . Periodical sensitivity /scenarioanalysis,stresstestingisperformed,toreviewsensitivity & el el A GEMENT FRAMEW el ves. r ame work hasbeendeveloped keepinginmind,that: v TION e, strongmonitoringandcontrolactivities shouldbeintegral totheBank. . ANK v es. Ittakesaholisticviewofitsin ORK . Moreandmoresignificanceisbeingattached toaneffecti v e, ithastoberunonanenterpriselevel. Riskgo T he Bankbelieves inacautiousyet steady approac v e alsobeendefinedforeach assetclass. v ed by theseniormanagementandBoard. T his functionifperformedwithdiligence amew v v estment andfinancingneeds. e riskmanagementfr c h, properanalysisandeffecti ork. Riskmanagementcannotli v ernance. OurRisk amew v ernance must hic ork; itthan h w vailable v e and vided v ation ould e ve el w h , 57 Annual Report 2009 58 Annual Report 2009 Credit Risk 40.1 40.1.1.1Segments by classofbusiness 40.1.1 * Othersinclude Sole Proprietors,trusts,fundaccounts, governmentaccountsetc. Others* Individuals Services Insurance Financial Transport, storageandcommunication Exports /imports Wholesale andretailtrade Power (electricity),gas,water,sanitary Construction Production andtransmissionofenergy Electronics andelectricalappliances Education Automobile andtransportationequipment Footwear andleathergarments Sugar Cement Chemical andpharmaceuticals Textile T iv) the Bankhasalready metitscommitments. T iii) T ii) another partyatapricelower thantheoriginalcontract price. T i) whole. T Credit riskarisesduetotheofaborrower defaultingonhiscommitmenteitherinpartorasa Mining andQuarrying to keeprisksaminimumthroughbroaddi T of pri restrictions and/ortheriskthatcountry'sspecificeconomicpoliticalfactorsprecipitatedefault that acountryissueslegislationtoprohibitfreetransfer rightsoffundsincludingforeignexc and /ortheriskthatcross-bordertransfer offundscouldberestrictedorcompletelyblocked, i.e. to spreadtheBank'screditandtrade financingactivities o Agriculture, forestry,huntingandfishing1, of financings,depositsandcontingenciescommitments. Segmental Informationispresentedinrespectoftheclassbusinessandgeographical distribution Segmental information should asarulebesecuredandselfliquidating. he riskthatthecounter-party defaultsduring thetermofatransaction (Murabaha, Ijarah etc.). he Bankplacesastrongemphasisonlong-termstabilitybeforehighreturns.ItistheBank'sstr he riskthatthecounter-party doesnotmeet itscommitmentsatthematurityoftransaction after he riskthatacountryinitsfunctionascontracting partnerdefaultsduringthetermofatr here isariskthattheassetrepossessedduetodefaultoflesseemay besoldorleasedoutto Country risk Settlement risk Counter partyrisk Price risk v ate sectorcounterparties(socialunrest,civil war etc.) he termCreditRiskhascertainsub-categoriesasfollo 35181100 79738100 ,3,8 100.0% 1,439,984 100.0% 27,987,378 100.0% 13,531,861 Financings ,8,3 32 194484.%681845.0% 648,128 42.8% 11,974,438 13.2% 1,782,030 ,0,6 19 ,9,1 29.3% 8,199,113 11.9% 1,605,761 ,2,2 28 474,203 12.8% 1,724,828 ,3,4 36 5,3 .%192012.4% 179,210 1.6% 4.5% 454,334 13.6% 1,272,868 10.3% 1,835,647 1,393,750 Rupees in ‘000 2,7 .%194905 ,0 0.6% 8,000 0.5% 149,459 6.8% 926,070 6,0 .%970533 7216.8% 97,221 3.3% 917,035 3.5% 469,805 4,8 .%138304 2743.0% 42,704 0.4% 123,813 5.5% 747,088 9,8 .%187666.5% 1,817,606 2.1% 290,287 8,7 .%170207 1,4 7.7% 110,846 0.7% 197,062 1.4% 187,978 9,9 .%742327 2774.4% 62,767 2.7% 744,283 1.4% 192,490 5,1 .%8,4 .%1,5 1.2% 16,753 0.3% 82,041 1.1% 150,014 1,2 .%6,4 .%8960.6% 8,946 0.2% 66,145 0.8% 114,322 9,6 .%14450.4% 114,415 2.9% 396,967 6,9 .%4,1 .%3,0 2.1% 30,000 0.2% 44,316 5.6% 761,592 6,2 .%587921 ,2 0.4% 6,027 2.1% 598,799 6.4% 866,027 63206 6,0 .%172913.6% 197,299 0.6% 160,501 0.6% 76,372 ,1 .1 0420.3% 70,482 0.01% 1,315 ,1 .%19660.6% 159,646 0.1% 9,518 v ersification intermsofgeogr - - (Gross) Per et Rupees cent 1210.1% 21,221 - 4,9 1.2% 345,598 - v Deposits er awiderange ofcustomers.F in ‘000 ws: 2009 Per et Rupees cent 1.7% aph y andproductmix Contingencies and in ‘000 2032.2% 32,083 Commitments ------ansaction inancing Per hange cent ategy 40.1.1.3Details ofnon-performingfinancingsandspecificprovisions by classofbusinesssegment 40.1.1.2Segments by sector * Provisions havebeenmadeunder subjectiveevaluation. Others * Individuals* Transport, Storage andCommunication Paper product* Services Construction Import/Export Automobile andTransportation equipment Cement Power (electricity),gas,water,sanitary Chemical andpharmaceuticals Textile * Wholesale andretailtrade Private Public /Government Private Public /Go * OthersincludeSoleProprietors,trusts,fundaccounts,go Others* Individuals Services Insurance Financial Tr Exports /imports Wholesale andretailtr Po Construction Production andtransmission ofenergy Electronics andelectricalappliance Education A F Sugar Cement Chemical andpharmaceuticals Textile Agriculture, forestry, huntingandfishing ootwear andleathergarments utomobile andtransportation equipment ansport, storage andcommunication wer (electricity),gas,w vernment ade ater , sanitary 291819%2,3,2 6 ,7,0 88% 100% 1,273,808 1,439,984 96% 100% 27,987,378 26,737,323 100% 96% 13,531,861 12,931,861 Deposits (Gross) Financings ,8,6 0%1,5,7 1 ,8,4 96% 100% 1,751,914 1,687,445 100% 91% 12,477,955 100% 11,354,171 100% 6,687,460 6,687,460 ,8,6 0%1,7,5 0%17194100% 1,751,914 100% 12,477,955 100% 6,687,460 ,8,6 22 ,6,8 32.5% 4,060,087 22.2% 1,481,866 ,4,6 46 18507 5,3 25.7% 450,434 0.7% 91,885 24.6% 1,644,862 Rupees Rupees Rupees in ‘000 in ‘000 in ‘000 0,0 %120054 6,7 12% 166,176 4% 1,250,055 4% 600,000 3,4 26 ,1,0 14 2,7 35.6% 623,274 51.4% 6,415,608 12.6% 839,549 8,7 .%152308 3143.6% 63,144 0.8% 105,243 7.2% 484,577 8,8 4.3% 285,189 8,2 .%7,1 .%7750.4% 7,735 0.6% 75,513 4.3% 284,221 5,0 .%393930 ,3 0.1% 1,735 3.0% 369,359 2.3% 154,706 5,8 .%467638 3122.5% 43,142 3.8% 476,776 3.8% 256,589 7,5 .%6,3 .%6,6 3.9% 69,063 0.5% 61,537 2.6% 170,952 4,5 .%3,6 .%3,8 1.9% 32,682 0.3% 34,663 3.7% 247,957 7,8 .%453 5.6% 372,986 5,0 .%36393.0% 376,399 3.7% 250,000 54704 70301 3570.8% 13,507 0.1% 17,053 0.4% 25,427 9331.0% 69,353 15,702 23,250 36311 22603 1,9 6.4% 112,898 0.3% 42,236 1.1% 73,663 1,235 ,7 .%2,9 .%4020.2% 4,092 0.2% 23,897 0.1% 5,376 Financings Financings - - v ernment accountsetc. Per Per Per et Rupees cent et Rupees cent cent 0.2 % 0.3 % - ,2,8 %6,6 4% 64,469 9% 1,123,784 - 2450.7% 92,495 - iacnsPoiin iacn Provisions Financing Provisions Financings lsiidSeii lsiidSpecific Classified Specific Classified Rupees in ‘000 in ‘000 in ‘000 8,6 230,928 37,865 788,665 177,359 2,6 38,941 120,667 100,000 2,5 32,486 123,058 5,9 102,473 155,997 1,7 1.7% 218,276 1301,108 21,360 37012,422 23,750 3785,483 63,758 25501 4,0 14.% 245,000 0.1% 12,545 2,117 3,930 9 150 599 Deposits Deposits 2008 2009 2008 - - - - - 2009 Per Per Per Held et Rupees cent et Rupees cent et Rupees cent Rupees in'000 ------5284.9% 85,208 - - Contingencies and Contingencies and Contingencies and in ‘000 in ‘000 in ‘000 8,9 141,687 186,093 6938,599 16,913 01118,775 30,101 99069,980 69,980 32023,250 23,250 2293,199 12,289 Commitments Commitments Commitments ,0 8,202 8,809 ,4 2,485 9,940 ,0 1,250 5,000 ,3 2,432 2,432 ,8 3,341 6,683 9 174 696 ------2008 Per Per Per Held cent cent cent 59 Annual Report 2009 60 Annual Report 2009 Credit Risk:StandardizedApproach 40.1.2 40.1.1.5Geographical segmentanalysis 40.1.1.4Details ofnon-performingfinancingsandspecificprovisions by sector Pakistan Corporate Exposures Types ofExposuresandECAI's used compatible totherating guidelinesofSBP, whichwillsupportusininternallyrating ourcreditclients. exposures, where available.Thebankhasalsorecentlyemployedcreditrating model,whichis The BankusesreputableandSBPapprovedrating agenciesforderiving riskweighttospecificcredit in theIRBApproach Credit Risk:DisclosuresforportfoliosubjecttotheStandardizedApproach&supervisoryriskweights towards theFIRBandAdvanced approach. CRM (CreditRiskMitigation)technique where applicable.TheBankcarriesastrongdesiretomove whole. TheBankhascurrentlyemployedstandardizedapproach forevaluation ofcreditrisk.Ituses Credit riskarisesduetotheofaborrower defaultingonhiscommitmentetherinpartorasa Pakistan Private Public/ Go Banks vernment I AR Others PACRA JCR -VIS Total assetsNetassetsContingencies Loss before Total assetsNetassetsContingencies Loss before iacnsPoiin iacn Pro Financing Provisions Financings 5299 42671470231,439,984 4,740,293 34,286,771 (562,909) 2912 90860511811,751,914 5,191,821 19,088,600 (229,152) and employed employed taxation and employed employed taxation lsiidSeii lsiidSpecific Classified Specific Classified 8,6 3,2 8,9 141,687 141,687 186,093 186,093 230,928 230,928 788,665 788,665 - 2009 Held Rupees in'000 Rupees in'000 Rupees in'000 2009 2008 2009 - commitments commitments - - 2008 visions Held N/A N/A Investment inequitiesforgenerating revenue inshortterm Strategicinvestments • • Equity Position RiskintheBankingbook–Basel IISpecific 40.2 40.1.2.2Credit RiskDisclosureswithrespecttoCreditMitigationforStandardandIRBApproaches- 40.1.2.1Credit Risk:StandardizedApproach CRM =CreditRiskMitigation value andcharged toprofitandlossaccount. Provision fordiminution inthevalue ofsecuritiesis made afterconsideringimpairment, ifany intheir SECP andtherequirements of approvedInternational Accounting Standardsasapplicableakistan. inP These equityinvestmentsareaccountedfor and disclosedaspertheprovisions anddirectivesofSBP , Equity positionincludesthefollowing: due tothechanges intheexposureamountsandresultantamountofcashcollateral obtained. against amountofRs567.698millioninyear 2008.The differenceinthevalue ofcashcollateral is During theyear,totalamountofcashcollateral usedforCRMpurposeswas Rs.421.214millionas million. the BankthroughCRMagainsttotaloff-balancesheet, non-market relatedexposureofRs.1,237.802 is subjecttotheCRMofRs.38.842million.HencetotalbenefitRsmillionwas availedby Under off-balancesheet,non-marketrelatedexposures;thecorporate portfolioofRs1,237.802million through CRMagainsttotalon-balancesheetexposureofRs.12,444.541million. million issubjecttoCRMofRs.172.275million.Thetotalbenefit382.372was availed million issubjecttotheCRMofRs.210.097whereas aclaimonretailportfolioofRs.501.020 standardized approach foron-balancesheetexposures,thecorporate portfolioofRs.11,943.520 The BanktakesthebenefitofCRMagainstitsclaimsoncorporate andretailportfolio.Underthe the marketconditions. they generally donotposerisktotheBankintermsofchange intheirvaluation duetochanges in laid down by SBP. Sinceeligiblecollaterals forCRMpurposesareallintheformofcashcollaterals, Valuation andmanagementofeligiblecollaterals forCRMisbeingdoneinlinewiththeconditions collaterals availablewiththeBankinformofsecuritydepositsandcashmargins. conversion factors.Underthestandardizedapproach theBankhastakenadvantageofcash standardized approach areconvertedintocreditexposureequialentsthroughtheuseof simple approach forCreditRiskMitigation(CRM).Off-balancesheetitemsunderthesimplified Bank obtainscapitalreliefforbothonandoff-balancesheetnon-marketrelatedexposuresby using Basel IISpecific. Total Retail Corpor Exposures ate Category Unrated Rating 150% 100% 20% 75% 50% 50% 20% 0% 0% Credit ExposuressubjecttoStandardisedapproach 2445132321,6,6 ,3,4 7,8 5,357,561 379,288 5,736,849 12,062,169 382,372 12,444,541 Outstanding ,5,9 1,9 ,4,9 ,0,7 1,1 4,885,957 215,014 5,100,971 7,745,395 210,097 7,955,492 3,343,580 Ntaon Amount Net amount Deduction Amount 0,2 7,7 2,4 4,3 6,7 378,463 164,274 542,737 328,746 172,275 501,021 248,256 382,879 13,313 - - - - CRM 2009 - - - 248,256 - 13,313 - 8,7 55,496 382,879 - ,4,8 37,645 3,343,580 - - Rs. In‘000 - - - - Outstanding ------Deduction CRM 2008 ------55,496 - 37,645 - - - amount Net 61 Annual Report 2009 62 Annual Report 2009 40.4 Yield/ProfitRateRiskinthebankingbook–BaselIIspecific 40.3 041F 40.4.1 Saudi Riy ACU U.A.E Dirham Euro Bank estimatesc J Market riskencompassestheoflossesduetoad Market Risk Bank by applyingupward anddo sheet positionsby conducting duration gap analysis. Italsoassessesyieldrate riskonearningsofthe be repricedaspertheirrespectiv data. Itincludescurrentbalancesandcontractual yieldrates; bankunderstandsthatitsfinancingshall It includesallmaterialyieldriskpositionsofthebanktakenintoaccountrepricingandmaturity Great BritainP United StatesDollar P be very minimal. T carrying afixedrate, foreignexchange rates, securities,precious metalsorothercommodities. Euro J Great BritainP United StatesDollar U.A.E Dirham P CHF ACU consequent tothechanges inforeignexchange rates. F of maturityunlesssuch risksha Moreover before itentersintofinancialmarketsfortr speculativ Saudi Riy open positionismanagedwithinthestatutorylimitsasfixedby theStateBankofP manages itsforeignexchange exposureby matching foreigncurrency assetsandliabilities. deposits, foreigncurrency placementswithStateBankofPakistan andotherbanksetc. of forward promises,foreigncurrency cashinhand,balanceswithbanksabroad,foreigncurrenc apanese apanese akistan Rupee akistan Rupee oreign Exchange Risk oreign exchange orcurrency riskarisesfromthefluctuationinvalue offinancialinstruments he strategy ofBankistokeepmarketriskstheminimuminthatdoesnotenterintoan Yen Yen al al , sincetheBankdoesnotdealininterestbasedproducts,impactofabo e transaction. Ingeneral theBankensuresthatanadequatehedgingmechanism isinplace ound ound hanges intheeconomicvalue ofequityduetochange inthe yield rates onon-balance T he Bankdoesnotha v e beentakencareofthroughsomeothermec e contr wnw ard shoc v acts. e positionsorforward exchange contracts giving mismatc ading. ks. T he Bank’s foreignexchange exposurecomprises v erse mo 356422,6,4 ,4 4,616,004 8,749 28,969,147 33,576,402 4267129,546,478 34,286,771 9086013,896,779 19,088,600 881341,8,9 360 5,173,162 (3,670) 13,684,492 18,861,324 2,0 0,7 879 111,977 (8,749) 408,379 529,105 sesLaiiisOff-balance Liabilities Assets sesLaiiisOff-balance Liabilities Assets 7,9 6,7 ,7 8,682 3,670 169,779 174,791 14390,714 91,463 96678,238 79,676 41532,858 34,105 2659,650 12,635 5,923 2,695 2,108 2,545 494 475 538 v 493 599 ements inmarketsforinstruments Rupees in'000 Rupees in'000 2008 2009 - - - - - hanism. - - - - sheet items sheet items akistan. 4,740,293 - 494 - 749 - 1,438 - 475 - 5,923 - 538 - 2,695 - v 2,108 - 5,191,821 - 2,545 - 493 - 1,247 - 599 - 2,985 - e riskswill T Net foreign Net foreign currenc currenc exposure exposure he Bank T he net hes y y y y 40.5

042Mismatc 40.4.2

042MismatchofProfit/YieldRateSensiti 40.4.2 the Bankinaposition ofhaving to liquidateassetsinavery shortperiodoftimeand atlow prices. important customerdeposits(including interbankdeposits). A suddensurgeinliabilitywithdr Liquidity riskisdefinedasinability toraise deposits atacompetiti Liquidity Risk On-balance sheetgap Risk SensitivityGap Cumulative Yield/Profit Sensitivity Gap T Other liabilities subject tofinancelease Liabilities againstassets Sub-ordinated loans accounts Deposits andother institutions Due tofinancial Bills payable Liabilities Other assets Financings Investments Due fromfinancial institution Other banks Balances with treasurybanks Cash andbalanceswith Assets Risk SensitivityGap Cumulative Yield/Profit instruments On-balance sheetfinancial On-balance sheetgap Sensitivity Gap Total Yield/ProfitRisk Other liabilities Sub-ordinated loans accounts Deposits andother institutions Due tofinancial Bills payable Liabilities Other assets Financings Investments institutions Due fromfinancial Other banks Balances with treasury banks Cash andbalanceswith Assets instruments On-balance sheetfinancial otal Yield/ProfitRisk h ofProfit/ Profit rate Profit rate Effective Effective 50%657519723785194441798320153621674365414999939 429,969 665,421 1,637,473 573,602 342,011 157,918 994,474 798,501 927,223 6,527,531 15.06% 54%5,019,525 15.48% 67%4,5 18428,547 11,804 40,351 2,099,942 16.75% 2,207,490 13.50% 40%1,8,5 3,9 2,8 ,6,6 ,7,9 3,2 ,0,6 7,9 7,0 7,1 1,609 577,015 479,504 977,695 1,909,165 735,527 5,878,793 1,560,266 624,986 537,591 13,282,152 14.00% 33%6,813,191 13.33% 21%408834,018,813 4,018,813 12.14% yield / yield / .8 247953408889776782115732034355224734304,659 2,417,374 355,522 240,384 1,155,743 647,802 879,707 3,420,878 12,477,955 7.28% .0 4,3 2 3,8 109,231 135,980 728 245,939 6.50% .4 797388249413096935931377412712536335531,653,612 3,395,503 1,275,356 401,287 3,103,787 933,579 1,380,956 8,264,904 27,987,378 6.74% .0 156,160 6.50% .3 ,5,5 1,539,014 2,059,550 9.43% Y ield RateSensiti 3363234166105677703115732034355224734304,659 2,417,374 355,522 240,384 1,155,743 757,033 1,015,687 3,421,606 13,316,342 6327130899870810234179882018362380232511149992,809,476 429,969 2,571,121 3,800,283 873,602 802,011 157,918 1,002,384 827,048 3,038,969 16,312,781 8849482494145461052931377412712536335531,653,612 3,395,503 1,275,356 401,287 3,103,787 1,005,249 1,465,446 8,264,904 28,854,984 0973760548649618026588731080053539163952367257055,476,862 577,015 2,356,722 1,683,945 5,335,369 1,038,010 5,878,793 1,870,266 624,986 6,095,418 30,937,387 ,9,3 3267 1869 4,5 9785 6,2 1,8 ,8,0 ,6,6 2,6 (838,858) 429,969 2,266,462 1,382,909 518,080 561,627 (997,825) 245,351 (188,639) (382,637) 2,996,439 2,175,413 ,8,0 21946 8040 6,1 ,7,0 3,2 ,6,1 17158 0,1 7,1 (2,812,978) 577,015 703,110 (1,711,558) 4,060,013 636,723 2,775,006 865,017 (840,460) (2,169,486) 2,082,403 4,217,515 Total Total 238,802 353,646 342,471 225,838 485,608 546,166 - - - - - 21946 30996 21498 3,7 ,6,0 ,2,1 ,1,5 ,1,6 ,9,8 2,082,403 4,895,381 4,318,366 3,615,255 5,326,813 1,266,800 630,078 (2,144,928) (3,009,946) (2,169,486) 21946 8040 6,1 ,7,0 3,2 ,6,1 17158 0,1 7,1 (2,812,978) 577,015 703,110 (1,711,558) 4,060,013 636,723 2,775,006 865,017 (840,460) (2,169,486) Mnh3Mnh otst er2Yas3Yas5Yas10Years 5Years 3Years 2Years to1Year 6Months 3Months Month Mnh3Mnh otst er2Yas3Yas5Yas10Years 5Years 3Years 2Years to1Year 6Months 3Months Month po1Oe o vr3t vr6MnhOe oOe oOe oOe oAbove10 Over5to Over3to Over2to Over6MonthsOver1to Over3to Over1to Upto 1 po1Oe o vr3t vr6MnhOe oOe oOe oOe oAbove10 Over5to Over3to Over2to Over6MonthsOver1to Over3to Over1to Upto 1 3267 1869 4,5 9785 6,2 1,8 ,8,0 ,6,6 2,6 (838,858) 2,996,439 3,835,297 429,969 3,405,328 2,266,462 1,138,866 1,382,909 (244,043) 518,080 (762,123) (1,323,750) 561,627 (325,925) (997,825) (571,276) 245,351 (382,637) (188,639) (382,637) v ------44071,670 84,490 ------e Assets andLiabilities v e Assets andLiabilities ------7,910 ------310,000 - - - - - Exposed toYield/Profitrisk Exposed toYield/Profitrisk ------6,0 0,0 ,6,1 1,905,700 2,162,810 300,000 460,000 ------0,8 ,2,0 0,5 1,877,218 706,250 3,426,204 302,483 - - - - - v 2008 e rate. Itcanbecausedby thewithdr Rupees in'000 Rupees in'000 ------2009 ------aw ------Years Years als may lea 3,648,334 238,802 - - - - 3,055,886 - - 353,646 - 342,471 - 191,015 - - 99,638 - 2,175,413 - - 225,838 - - 7,578,394 - - 485,608 - 546,166 - - 520,536 - 4,217,515 - - aw instruments instruments Non-profit Non-profit 8,289,840 financial financial bearing bearing 191,036 al of ve ------63 Annual Report 2009 64 Annual Report 2009

Net assets Surplus/(Deficit) onrevaluationofassets Accumalated Losses Reserves Share capital/Headofficeaccount Deferred taxliabilities Other liabilities Finance lease Liabilities againstassetssubjectto Sub-ordinated loan Deposits andotheraccounts Due tofinancialinstitutions Bills payable Liabilities Deferred taxassets Operating fixedassets Financings Other assets Investments Due fromfinancialinstitutions Balances withotherbanks Cash andbalanceswithtreasurybanks Assets Surplus/(Deficit) onrevaluationofassets Accumalated Losses Reserves Share capital/Headofficeaccount Net assets Deferred taxliabilities Other liabilities Finance lease Liabilities againstassetssubjectto Sub-ordinated loans Deposits andotheraccounts Due tofinancialinstitutions Bills payable Liabilities Operating fixedassets Deferred taxassets Other assets Financings Investments Due fromfinancialinstitutions Balances withotherbanks T Management (ALM)process(stronglydifferingmaturityprofiles). caused by adiscrepancy ofthecashflows fromthetwo sidesofthebalancesheetduetoafaulty Under refinanceriskweunderstandtheofholdinglonger-term assetsrelativetoliabilities.Generally thisis Cash andbalanceswithtreasurybanks Assets Maturities of Assets andLiabilities An Assets-Liabilities Committee(ALCO)isresponsibleformonitoringtheliquidityandmarketrisksofBank. sheet. he riskisminimizedb

y broaddi 3867970506102147703124062034355228785304,659 2,817,845 355,522 240,384 1,284,076 757,033 1,052,194 7,085,066 13,896,779 247956467489776782115732034355224734304,659 2,417,374 355,522 240,384 1,155,743 647,802 879,707 6,476,764 12,477,955 908605889410247101136709102921107540292290301,201,998 2,980,350 4,002,912 1,160,785 1,052,942 697,099 1,091,113 1,022,487 5,878,914 19,088,600 956481,6,5 ,2,0 ,0,4 ,0,9 0,8 ,7,5 ,1,2 1,653,612 3,816,923 1,275,356 401,287 3,206,195 1,005,249 1,524,405 16,663,451 29,546,478 797381,4,9 ,8,5 3,7 ,0,8 0,8 ,7,5 ,9,0 1,653,612 3,395,503 1,275,356 401,287 3,103,787 933,579 1,380,956 15,843,298 27,987,378 426711,7,4 ,8,0 ,8,8 ,7,6 ,0,5 ,2,8 ,4,2 ,4,7 1,754,136 2,845,871 1,841,427 5,725,285 1,407,757 6,173,866 1,980,081 1,084,102 11,474,246 34,286,771 322125776651115155588737557199159765495 577,016 479,50 977,695 1,909,165 735,527 5,878,793 1,561,515 625,191 537,746 13,282,152 ,9,2 12612 2,0)3400(8,7)8258852311507265611,201,998 2,675,691 1,185,067 805,263 812,558 5,191,821 (586,977) 334,080 (29,707) 5,279,679 (1,206,152) 5,191,821 ,1,4 0914,2 27335752091209122694929315,757 409,229 202,629 250,931 250,931 355,705 62,733 41,822 20,911 1,910,648 ,2,3 2,2 9,1 9,0 5,0 4,1 7,0 ,3,7 6,2 429,969 665,421 1,637,473 573,602 342,011 158,706 994,606 798,518 927,225 6,527,531 5,019,525 ,0,9 2,199,580 2,207,490 ,7,1 2,175,413 2,175,413 4,740,293 ,4,9 51925 4033 7,3 ,6,7 ,0,7 ,4,2 19546112291,754,136 1,192,259 (1,975,496 4,449,929 1,006,470 2,967,671 974,832 5,279,679 (440,303) (5,189,205) 4,740,293 ,9,0 0826,2 24715253977397717424919639,089 489,149 157,482 369,747 369,747 185,215 92,437 61,626 30,812 2,395,304 ,5,3 0,8 9,8 619109,858 16,129 397,285 609,789 1,153,230 ,1,9 21 6,813,191 ,1,1 4,018,813 4,018,813 ,5,5 2,059,550 2,059,550 ,1,1 4,217,515 4,217,515 (577,246) v Total Total (98,307) 1,3 5,2 36,507 253,928 819,239 4,3 2 3,8 109,231 135,980 728 245,939 5,4 353,646 353,646 265,257 4,8 4,8 5,0 584182,688 25,864 153,600 543,981 942,385 1,3 3,4 58,959 334,545 917,332 156,160 8,0 485,608 485,608 347,016 ersification andaminimumofconcentrations onbothsidesofthebalance 10,449 0311,0 28,547 11,804 40,351 37,860

------Mnh3Mnh otst er2Yas3Yas5Yas10Years 5Years 3Years 2Years to1Year 6Months 3Months Month po1Oe o vr3tOe otsvr1t vr2t vr3t vr5t Above10 Over5to Over3to Over2to Over3toOver6MonthsOver 1to Over1to Upto 1 po1Oe o vr3t vr6Mnh vr1t vr2t vr3t vr5t Above10 Over5to Over3to Over2to Over1to Over6Months Over3to Over1to Upto 1 Month ------ots6Mnh o1Ya er er er 10Years 5Years 3Years 2Years to1Year 6Months 3 Months 44071,670 84,490 - - - - - 7,910 ------310,000 - - - - - 128,333 ------102,408 ------Rupees in'000 ------6,0 0,0 ,6,1 ,0,0 191,015 1,905,700 2,162,810 300,000 460,000 ------0,8 ,2,0 0,5 ,7,1 191,015 1,877,218 706,250 3,426,204 302,483 - - - - Rupees in'000 2008 2009 ------36,252 ------20,169 - - - - - 400,471 ------421,420 ------Asset-Liability ------265,257 ------347,016 - - - - - Years Years ------1 DA 41. 2 GENERAL 42.1 42. 42.2 40.9 40.8 Str 40.7 40.6 Operational Risk Chairman department oftheBank. T of thattr whic Captions, asprescribedby BSDCircular No.04of2006datedFebruary 17,2006issuedby SBP, inrespectof T balance sheetandprofitlossaccount. tr Association (“PB supports theseorganizationsthroughitsmembershipofrelevant bankingindustryassociationi.e.Pakistan Banks T Shariah Non-complianceriskarisesduetothelack ofa Shariah Non-ComplianceRisk party risksintheinter-bank market. Systemic riskisreducedby theactivities ofbothnationalandinternationalregulatoryauthorities. Suc Systemic riskistheofatotalorpartialcollapsefinancialsystem. Systemic Risk whic aw T term changes instrategic par Str more sophisticatedapproach inthecomingy this category. and systemsorfromexternalevents andw This isthecollectivetermforallrisksw his riskisco hese financialstatementsha he figuresinthefinancialstatementsareroundedofftonearest thousandofrupees. he Bankfollows adeliberate low-risk str ansaction w ategic riskarisesduetowrongassumptionsinstrategic decisionmakingorthefailuretoreactcorrectlylong- ategic Risk are oftheneedreducingrisk. TE OF h acollapsecouldbeduetotechnical factorsormarketdri h in h therearenoamounts,ha ansaction. volv AUTHORISA es alllevels ofmanagementandw hic v T ered by carryingoutextensi he BankiscurrentlypursuingaBasicIndicator h may resultinreputationallosstotheBank,aswellas,reversal ofincometheBankinrespect A ”). T he Bankalsotakesaccountofsystemicriskby meansofcarefulmanagementcounter TION FORISSUE ameters. v Chief ExecutiveOfficer e beenappro v e notbeenreproducedinthesefinancialstatements,except for captionsofthe T he Bankhasawellestablishedstrategic planningandevaluation process hic v ategy e Shariahtraining andorientationfrequentreviewsby theShariah hic v h arisethroughinadequateorfailedinternalprocesses,emplo ed by theBoardofDirectorsBankonMarch04,2010. ears. h canonlybepartiallyquantified.Inaddition,legalrisksfallinto hic . W h issubjecttoregularreview ithin thegeneral constraints ofitsniche markettheBankis w areness amongstthestaffwhile processingaparticular v Approac en (psychological reasons). h (BIA),butwishestomo Director . T he Bankacti v e to Director w ards a y vely ees 65 Annual Report 2009 We have audited the annexed consolidated financial statements comprising consolidated balance sheet of BankIslami Pakistan Limited (the Bank) and its subsidiary company, BankIslami Modaraba Investment Limited (together referred to as Group) as at 31 December 2009, and the related consolidated profit and loss account, consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof for the year then ended, in which are incorporated the unaudited certified returns from the branches except for seven branches which have been audited by us. The financial statements of the subsidiary were reviewed in accordance with the International Standards on Review Engagements 2410 by another firm of Chartered Accountants, whose report has been furnished to us and our opinion in so far as it relates to the amounts included for the subsidiary, is based solely on the report of other auditor. These consolidated financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2009 and the results of its operations, its cash flows and changes in equity for the year then ended in accordance with the approved accounting standards as applicable in Pakistan.

Without qualifying our opinion, we draw attention to note 1.1 to the accompanying financial statements wherein the Bank has disclosed that the Bank has been granted exemption from the requirement to have the minimum paid-up capital (free of losses) of Rs. 6.00 billion as at 31 December 2009 till March 31, 2010. Annual Report 2009

March 04, 2010

Karachi

66

December December Note 31, 2009 31, 2008 Rupees in `000 ASSETS Cash and balances with treasury banks 8 4,217,520 2,175,418 Balances with other banks 9 2,059,808 2,207,640 Due from financial institutions 10 4,018,813 40,351 Investments 11 6,653,447 4,861,883 Financings 12 13,282,152 6,527,531 Operating fixed assets 13 2,375,515 1,889,543 Deferred tax assets 14 358,625 276,283 Other assets 15 1,241,621 1,032,375 34,207,501 19,011,024

LIABILITIES Bills payable 16 485,608 353,646 Due to financial institutions 17 156,160 245,939 Deposits and other accounts 18 27,911,651 12,412,598 Sub-ordinated loan - - Liabilities against assets subject to finance lease - - Deferred tax liabilities - - Other liabilities 19 918,705 818,421 29,472,124 13,830,604 NET ASSETS 4,735,377 5,180,420

REPRESENTED BY

Share capital 20 5,279,679 5,279,679 Reserves - - Accumulated losses (574,078) (101,364) 4,705,601 5,178,315 Surplus on revaluation of assets - net of deferred tax 21 29,776 2,105 4,735,377 5,180,420

CONTINGENCIES AND COMMITMENTS 22 Annual Report 2009

The annexed notes from 1 to 42 form an integral part of these consolidated financial statements.

Chairman Chief Executive Officer Director Director 67 December December Note 31, 2009 31, 2008 Rupees in `000 Profit / return on financings, investments and 23 2,198,633 1,472,425 placements earned

Return on deposits and other dues expensed 24 1,215,019 723,685 Net spread earned 983,614 748,740

Provision against non-performing financings - net 12.8 89,780 130,556 Provision for diminution in the value of investments 11.6 15,000 - Provision against sukuk murabaha 10.5 6,418 - Bad debts written off directly - - 111,198 130,556 Net spread after provisions 872,416 618,184

OTHER INCOME

Fee, commission and brokerage income 37,854 112,117 Dividend income - 2,327 Income from dealing in foreign currencies 278,054 29,273 Capital gain / (loss) on sale of securities 25 2,356 31,273 Unrealised gain / (loss) on revaluation of investments classified as held for trading - - Other income 26 24,423 20,889 Total other income 342,687 195,879 1,215,103 814,063

OTHER EXPENSES

Administrative expenses 27 1,760,047 1,030,911 Other provisions / write offs - - Other charges 28 10,617 5,663 Total other expenses 1,770,664 1,036,574 (555,561) (222,511) Extra ordinary / unusual items - - LOSS BEFORE TAXATION (555,561) (222,511)

Taxation - Current (14,393) (874) - Prior years - - Annual Report 2009 - Deferred 97,240 175,502 29 82,847 174,628 LOSS AFTER TAXATION (472,714) (47,883)

Accumulated losses brought forward (101,364) (53,481) Accumulated losses carried forward (574,078) (101,364)

Basic loss per share - Rupee 30 (0.90) (0.11) Diluted loss per share - Rupee 30 (0.90) (0.11)

The annexed notes from 1 to 42 form an integral part of these consolidated financial statements.

Chairman Chief Executive Officer Director Director 68 T T Other comprehensiveincome Loss aftertaxation Chairman otal comprehensi he annexednotesfrom1to42formanintegr v e lossforthey Chief Executiv e Officer ear al partoftheseconsolidatedfinancialstatements. Note Director December 31, 2009 (472,714) (472,714) Rupees in`000 - December Director 31, 2008 (47,883) (47,883) - 69 Annual Report 2009 70 Annual Report 2009 T Cash andcashequi Cash andcashequi Net increaseincashandequi Net cashflow fromfinancingacti Issue ofsharecapital C Net cashusedin Sale proceedsofpropertyandequipmentdisposedoff Inv Di Net in C Net cashflow fromoperating acti Income taxpaid Increase /(decrease)inoperating liabilities Othersassets(excludingad F Duefromfinancialinstitutions (Increase) /decreaseinoperating assets Deferredcostamortised Gainonsaleofpropertyandequipment-net Provision againstsukukmur Provision fordiminutioninthevalue ofin Provision againstnon-performingfinancings Depreciationonoperating Ijar Depreciation Adjustments: Less: Dividend income Loss beforetaxation CASH FLOWS FROMOPERATING ACTIVITIES he annexednotesfrom1to42formanintegral partoftheseconsolidated financialstatements. ASH FLOWS FROMFINANCING ASH FLOWS FROMINVESTING Amortisation vidend recei Chairman estments inoperating fixedassets inancings Other liabilities Deposits andotheraccounts Due tofinancialinstitutions Bills pa v estments ina yable ved v v v v esting acti alents atendofthey alents atbeginningofthey ailable forsalesecurities v abaha ance taxationanddeferredcost) vities ah assets Chief Executiv e Officer vities vities ACTIVITIES valents ACTIVITIES ear vestments ear Note 31 31 Director (11,090,695) 15,641,520 15,499,053 (2,578,646) (1,763,994) (6,873,667) (3,984,881) 4,472,916 4,480,492 December 6,277,328 4,383,058 1,894,270 31, 2009 (555,561) (232,147) (555,561) (817,982) 100,284 131,962 485,228 303,420 (89,779) (70,333) 16,083 89,780 29,266 15,000 25,453 (7,576) 3,330 6,418 (192) Rupees in`000 - - - (2,327) -

(2,188,329) (1,183,897) (2,435,405) (2,884,221) (1,012,505) December 1,161,862 1,168,727 3,516,575 2,794,863 31, 2008 4,383,058 4,011,255 1,398,270 1,398,270 (222,511) (135,870) (224,838) 175,939 268,648 130,556 161,159 584,686 277,125 312,395 Director 371,803 87,557 16,019 (6,865) (1,015) 2,327 5,676 5,746 - - - The annexednotesfrom1to42formanintegral partoftheseconsolidatedfinancialstatements. Balance asatDecember31,2009 Total comprehensivelossfortheyear ended Other comprehensiveincome Net lossfortheyear Balance asatDecember31,2008 Total comprehensivelossfortheyear ended Other comprehensiveincome Net lossforthey pendingissuance Allotment ofrightsharesduringtheyear - Issue ofrightsharesduringtheyear Balance asatJanuary 01,2008 Chairman December 31,2009 December 31,2008 ear Chief Executiv e Officer 1,079,679 ,7,7 5408 4,705,601 (574,078) 5,279,679 5,178,315 (101,364) 5,279,679 1,000,000 ,0,0 5,8)3,146,519 (53,481) 3,200,000 capital Share - (7,1)(472,714) (472,714) (472,714) - (472,714) (47,883) - - (47,883) - - Director Rupees in`000 Accumulated losses (47,883) 1,079,679 - - - - 1,000,000 Director (47,883) Total - - 71 Annual Report 2009 1. STATUS AND NATURE OF BUSINESS

1.1 The Group comprise of:

BankIslami Pakistan Limited (Holding Company)

BankIslami Pakistan Limited (the Bank) was incorporated in Pakistan as a public limited company on October 18, 2004 under the Companies Ordinance, 1984 to carry out business of an Islamic Commercial Bank in accordance with the principles of Islamic Shariah.

The Bank was granted a 'Scheduled Islamic Commercial Bank' license on March 18, 2005, and formally commenced operations as a Scheduled Islamic Commercial bank with effect from April 07, 2006, on receiving notification in this regard from the State Bank of Pakistan (SBP) under section 37 of the State Bank of Pakistan Act, 1956. Currently, the Bank is engaged in corporate, commercial, consumer, investment and retail banking activities.

The registered office of the Bank is situated at 11th Floor, Dolmen City, Marine Drive, Block-4, Clifton, Karachi. The Bank commenced its operations from April 07, 2006. The shares of the Bank are quoted on the Karachi Stock Exchange. The Bank is operating with 102 branches including 32 sub branches (2008: 102 branches) as at December 31, 2009. The Pakistan Credit Rating Agency (Private) Limited (PACRA) has assigned the long term credit rating of the Bank as A (“Single A”) and the short term rating as A1 (“A One”).

The State Bank of Pakistan (SBP) vide BSD Circular No. 07 of 2009 dated April 15, 2009 has increased the Minimum Capital Requirement (MCR) for Banks upto Rs 10 billion to be achieved in a phased manner by December 31, 2013. The Minimum Capital Requirement (free of losses) as of December 31, 2009 was Rs 6 billion. The paid up capital of the Bank (free of losses) as of December 31, 2009 amounts to Rs. 4.706 billion. The Board of Directors, in order to comply with the enhanced capital requirement, is considering various options including but not limited to issue of right shares and acquisition options. In this connection, the Bank has already made an announcement to Karachi Stock Exchange about its decision to enter into a Memorandum of Understanding (MoU) with another Islamic Commercial Bank in relation to its merger/acquisition into/by the Bank. The Board is confident that it will meet the Minimum Capital Requirement within the stipulated time. In view of the above, the Bank has been granted an exemption till March 31, 2010 to meet the Minimum Capital Requirement by the SBP, vide its letter BSD/BAI-3/608/191/2010 dated March 3, 2010.

BankIslami Modaraba Investments Limited (Subsidiary company)

The subsidiary was incorporated in Pakistan on January 22, 1986 under the Companies Ordinance, 1984. Later on it was registered as a Modaraba Company with the Registrar of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980. The principal activity of the subsidiary is to Annual Report 2009 float and operate Modaraba. The subsidiary is managing its Modaraba with the name of MODARABA- AL-MALI. The principal place of business of the Subsidiary is situated at Tenth Floor, Progressive Square, Shahrah-e-Faisal, Karachi.

The financial statements of the subsidiary company have been consolidated on a line-by-line basis and the carrying value of the investments held by the holding company has been eliminated against the shareholder's equity in the subsidiary company. Intra group balances or transactions have been eliminated.

The financial statements of the subsidiary have been consolidated on their reviewed interim condensed financial statements for the half year ended December 31, 2009.

2. BASIS OF PRESENTATION

2.1 These consolidated financial statements have been prepared in accordance with the requirements of State Bank of Pakistan (SBP) vide BSD Circular No. 4 dated February 17, 2006.

2.2 The Group provides financing mainly through shariah compliant financial products. Except for Murabaha transactions (which are accounted for under the Islamic Financial Accounting Standard - 1), the purchases, sales and rentals arising under these arrangements are not reflected in these consolidated financial 72 .B 4. 5.1 SIGNIFIC 5. .STA 3. T 5.1.2 in equity surplus /(deficit)onrevaluation ofa However for certainfinancialinstrumentsw issued by SBP inv T sho accordingly single statement,orintwo linkedstatements. of comprehensi single lineiteminthestatementofchanges inequity. Inaddition,thestandardintroducesstatement includes onlydetailsoftransactions withowners, withnon-owner changes inequitypresentedasa T 5.1.1 described belo 31, 2008,exceptforchanges resultingfromtheadoptionoffollowing accountingstandards as those followed inthepreparation oftheGroup'sfinancialstatementsforyear endedDecember T in note5.3. hav T Disclosures” hasnotbeenmadeapplicableforbanks. Further Accounting Standard40,In Accounting Standard39,Financial Instruments:RecognitionandMeasurement(IAS39)International SBP asperBSDCircular No.10,dated or therequirementsofsaiddirecti or IFAS, therequirementsofCompanies Ordinance,1984,BankingCompanies1962 Exc Ordinance, 1984,BankingCompanies1962ordirecti Commission ofPakistan andtheStateBankofPakistan. standards asapplicableinPakistan. 1984, BankingCompaniesOrdinance,1962ordirecti as arenotifiedundertheCompaniesOrdinance,1984,requirementsof Islamic Financial Accounting Standards(IFAS) issuedby theInstituteofChartered Accountants ofP F T Shariah isrecognisedasc of rental/profitthereon.Income,ifany,receiv statements assuch butare restricted totheamountoffacilityactuallyutilizedandappropriateportion Change inaccountingpoliciesanddisclosures inancial ReportingStandards(IFRS)issuedby theInternational Accounting StandardsBoard(IASB)and he standardbecame effecti hese consolidatedfinancialstatementsha hese consolidatedfinancialstatementsha he revisedstandardbecameeffecti he standardseparates owner andnon-owner changes inequity. he accountingpoliciesadoptedinthepreparation ofthesefinancialstatementsareconsistentwith ASIS OFMEASUREMENT estments ha wn below equityandisnottakentothestatement ofcomprehensi hange CommissionofPakistan andtheStateBankofPakistan differwiththerequirementsofIFRS e notbeenconsideredinthepreparation oftheseconsolidatedfinancialstatements.Ho TEMENT OFCOMPLIANCE , accordingtothenotificationofSECPdated April 28,2008,theIFRS-7“Financial Instruments: . , inaccordancewiththerequirements oftheCompaniesOrdinance,1984andSBP directi ANT Adoption ofIFAS -2Ijar IAS 1-PresentationofFinancial Statements(Revised) , presentedprofitandlossaccountstatementof comprehensi . w: A v v e beenclassifiedandvalued inaccordancewiththerequirementofvarious cir CCOUNTING POLICIES e incomew harity pa v v e duringtheyear anddealswiththeaccounting forijarah financing contr hic estment Property(IAS40)forBankingcompaniestillfurtherinstructions. h presentsallitemsofrecognizedincomeandexpense, eitherinone hic yable. ah h ha v vailable-for Approv v e foraccountingperiodbeginningonorafterJanuary 01,2009. es shallprev A v ugust 26,2002hasdeferredtheapplicabilityofInternational e beenmarkedtomarketandarecarriedatfairvalue asstated v v e beenpreparedunderthehistoricalcostcon e beenpreparedinaccordancewithappro ed accountingstandardscompriseofsuch International T ed w he Grouphasadoptedtwo statementapproach and,has -sale in ail. hic Accordingly h doesnotcomplywiththeprinciplesofIslamic v Wherev estments isreportedunder separate account v es issuedby theSecurities andExc er therequirementsofCompanies , therequirementsofthesestandards T v he statementofchanges inequity e incomeandstatementofc v es issuedby theSecurities and v e incomesepar v v ed accounting ention except akistan hanges wever, hange culars ately. ves, acts 73 Annual Report 2009 74 Annual Report 2009 . Investments 5.3 . Tr 5.4 5.2 Surplus /(deficit)arisingonrevaluation oftheGroup'sheld-for costs lessimpairment,ifan Premium ordiscountondebtsecuritiesclassifiedasa Profit andlossonsaleofin v Pro loss accountwhen actuallyrealisedupondisposal. maturity arestatedatmarketvalue. In In accordancewiththerequirementsofSBP, quotedsecuritiesotherthanthoseclassifiedasheldto includes transaction costsassociatedwiththein Inv T Av positiv T Held tomaturity taking exists. T Held fortr 'av issued by SBP, theGroupclassifiesitsin In accordancewithBSDCircular No.10and14datedJuly 13,2004andSeptember24,respecti banks incurrentanddepositaccounts. method andtakentotheprofit andlossaccount. All 'regularw financial assets arethose,thecontract forw on w the balancesheetbelow equity. as a the profitandlossaccount. prices ordealer'smarginaresecuritiesincludedinaportfoliow Cash andcashequi million respecti loss beforetaxationfortheyear andtotalassetswould ha previous accountingpolicy inrespectofijarah contracts enteredintoonorafterJanuary 01,2009,the the Ijarah arrangements wereaccountedforby theGroupas finance leases.HadtheGroupappliedits "profit /returnonfinancings,in recognised intheprofitandlossaccounto established by regulationorcon included under"financings". leased outunderijarah arrangements atcostlessdepreciationandimpairment,ifany w after January 01,2009. As aresultofapplicationthisstandard,theGrouphasrecordedassets undertaken by theBank.T he standardisapplicableprospectivelyforIjarah contracts enteredintoonor Cash andcashequi alue andcharged toprofitandlossaccount. hese aresecuritiesw hese arein hese aresecuritieswithfixedordeterminablepayments andfixedmaturitythattheGrouphas ade dateaccounting ailable forsale ailable forsale'securitiesasfollo estments areinitiallyrecognisedatcostw vision fordiminutioninthevalue ofsecuritiesismadeafterconsideringimpairment,ifany intheir vailable-for hic e intentandabilitytoholdmaturity h commitmenttopur ading v estments thatdonotfallundertheheldfortrading orheldtomaturitycategories. a y' pur -sale iskeptin“Surplus/DeficitonRevaluation ofSecuritiesaccount”andisshown in vely. valents v alents compriseofcashandbalanceswithtreasurybanksother c hic hases andsalesoffinancial assetsarerecognisedonthetrade date,i.e.thedate h areeitheracquiredforgenerating profitfromshort-termfluctuationsinmarket y v . Unquotedsecuritiesarevalued atcostlessaccumulatedimpairment,ifan estments isincludedinprofitandlosscurrently T he surplus/(deficit)arisingonrevaluation ofquotedsecuritiesclassified T v c estments andplacementsearned"inthesefinancialstatements.Previously he rentalsfromijar T hase /saleismadeby theGroup.Regularw v he surplus/(deficit)arisingonthesesecuritiesistaken to theprofitand ention inthemarket place. ws: v estments classifiedasheldtomaturityarecarriedatamortised v estment portfoliointo'heldfortrading', 'heldtomaturity'and hic v . er thetermofcontract andha h requiresdeli hic vestment. h incaseof ah anddepreciationexpenseonijarah assetsare v ailable forsaleisamortisedusingeffecti v e beendecreasedandincreasedby Rs29.506 v ery ofassetswithin thetimeframe gener -tr v estments otherthan'heldfortr ading in hic h apatternofshort-termprofit v estment portfolioistakento . a v y pur e beenreportedunder c hases orsalesof hic h ha v e Interest v e been ading' vely, ally y. , . Financings 5.5 5.6.1 Oper 5.6 an undertaking(Promise-to-Pur / customeraShariacompliantassetgoodforcostpluspre-agreedprofit.Inprincipleonthebasisof recover Ijar Financings arefinancialproductsoriginatedby theGroupandprincipallycompriseMurabaha, Istisn’a, Mur off when thereisnorealistic prospectofreco identified doubtfulfinancinginadditiontogeneral provisioning requirements.Financings arewritten Regulations issuedby the SBP andcharged toprofitandlossaccount.Specificprovisions aremadefor Pro c to theGroupandcostof theitemcanbemeasuredreliably. All otherrepairandmaintenanceare appropriate, onlywhen itisprobablethatfutureeconomic benefitsassociatedwiththeitemwillflo Subsequent costsareincluded intheassetscarryingamountorarerecognisedas aseparate asset, as price andvalue inuse. w an assetmay beimpairedandcarryingvalues may notbereco T the assetremainedinuse. Depreciation onadditions/deletionsduringtheyear ischarged fortheproportionateperiodw useful lifeoftherelatedassetsatrates specifiedinnote13.2totheconsolidated financialstatements. Depreciation iscomputedusingthestraight-line methodby takingintoconsideration theestimated Property andequipmentarestatedatcostlessaccumulated depreciationandimpairment,ifan r Mushar the assetpays theproportionaterentalofsuch assettotheotherpartner(theBank). equity shareoftheotherpartneruntiltitletoistotallytransferred tohim. Diminishing Musharaka representsanassetinjointownership w seller andthepur goods /assetssubjectoftheMurabaha fromathirdpartyandtakesthepossessionthereof,ho (except forMurabaha w Musaw future dateagainstanad Salam isasaletransaction where thesellerundertakestosupplysomespecificgoodsbuyer ata in needofthatasset. Istisn'a isanordertomanufactureorconstructsomeassets. Open to alltypesoftrade transactions i.e.,underDocumentaryCredits(LCs),Collectionsand to thecustomeraftergettingtitleandpossessionofgoods.Murabaha financingisextended the Group(generally throughanundisclosedagent)thegoodsfromforeignsupplierandsellingthem Import Murabaha isaproduct,usedtofinancecommercial transaction w it totheclientatcostplusprofitagreeduponinPromise. Group canappointtheclientasitsagenttopur Ijar goods underIstisn'amodeandsellsthemthroughanagent. Property andequipment atio anddistributionoflossintheratio ofcapitalin harged tothe profit andlossaccount. he carryingvalues ofpropertyandequipmentarereviewedateach reportingdateforindicationthat here thecarryingvalues exceedtheestimatedreco ah isacontract inw ah, Salam,Musa vision againstnon-performingfinancingismadeinaccordancewiththerequirementsofPrudential abaha tothepur ating fixedassets Accounts. amah isasaletransaction inw aka /Modaraba aredifferenttypesofpartnershipsinbusinesswithdistributionprofitagreed able amount. c haser withoutany referencetothecostincurredby theseller w c hase ordererisasaletransaction wherein the firstparty(theBank)sellstotheclient amah andDiminishingMushar T he reco hic hic v ance pricefullypaidonspot. h theGroupbuysandrentsaproducti h isaccountedforatgrossrecei ver c hase) fromtheclient(thepur able amountofpropertyand equipmentisthegreaterofnetselling hic h priceofacommoditytobetraded isbargainedbetween very. c hase thegoods/assetsonitsbehalf. ver aka recei able amount,theassetsarewrittendown totheir T v vested. he Grouppur able) netofgeneral andspecificpro v c ables. hase orderer),theGrouppur v ered. Ifany such indicationexistsand v hereb e assettoapersonshortoffundsand T hese arestatedatamortisedcost y apartnerpromisestobuythe c hases marketable/exportable hic h consistsofpur . Thereafter T he partnerusing c wev hases the c hase b visions. , itsells er the hich w y. y 75 Annual Report 2009 76 Annual Report 2009 5.6.3 5.8.2 5.6.2 5.8.1 Taxation 5.8 Goodwill 5.7 Taxes”. is adjustedagainst therelateddeficit/surplus inaccordancewiththe requirementsofIAS12“Income T the deferredtaxassettobe utilized. extent thatitisnolongerprobable thatsufficienttaxableprofitwillbea T enacted orsubsequentlyatthebalancesheet date. w Deferred taxassetsandliabilitiesaremeasuredatthe tax rates thatareexpected toapplytheperiod and un-absorbedtaxlossescanbeutilized. T T amortisation ischarged in the monthinw Amortisation onadditionsischarged fromthemonthinw r ov that itisprobabletaxableprofitwillbea tax assetsarerecognisedforalldeductibletemporary differencesandun-absorbed taxlossestotheextent reporting purposes.Deferredtaxliabilitiesarerecognised foralltaxabletemporary differences.Deferred balance sheetdatebetweenthetaxbasesofassetsand liabilities andtheircarryingamountsforfinancial Deferred taxisprovided, usingthebalancesheetliabilitymethod,onall temporary differences atthe necessary relatingtopriory excess oftheirreco T are expectedtobederi Softw Gain andlossondisposalofassetsareincludedinprofitcurrently eac Residual values, usefullivesanddepreciationmethodsarereviewedadjusted,ifappropriate,at are expectedfromitsuseordisposal. An itemofpropertyandequipmentisderecognisedondisposalorwhen nofutureeconomicbenefits prev Pro be impaired. annually ormorefrequentlyifevents orchanges incircumstances indicatethatthecarryingvalue ma good share ofnetidentifiableassetstheacquiredentityatdateacquisition.F Good assets arewrittendown totheirestimatedreco Intangible assets Deferred taxation Capital w Current taxation ate specifiedinnote13.3totheconsolidatedfinancialstatements. he Groupalsorecognizesdeferred taxasset/liabilityondeficitsurplusrevaluation ofassetsw hese arestatedatcostlessimpairment,ifan hese arestatedatcostlessaccumulatedamortisationandimpairment,ifan he carryingamountsarereviewedateach balancesheetdatetoassesswhether theyarerecordedin he carryingamountofdeferred taxassetsisreviewedateach balancesheetdateandreducedtothe hen theassetisutilizedorliabilitysettled,based onthetaxrates (and taxlaws) thatha er theusefullifeofassetonsystematicbasistoincomeapplyingstraight-line methodatthe vision fortaxationisbasedonthetaxableincomeyear determinedinaccountswiththe h financialyear end. ailing laws fortaxationonincome. will ismeasuredatcostlessany accumulatedimpairmentlosses.Goodwill isreviewedforimpairment, are andotherdevelopment costsareonlycapitalizedtotheextentthatfutureeconomicbenefits will representsthedifferencebetweencostofacquisitionandfairvalue oftheGroup's ork inprogress ver able amounts,andwhere carryingvalues exceedestimatedreco v ed by theGroup. ears. T he charge fortaxalsoincludesadjustments,where considered hic v h theassetsaredeleted. ailable againstw y. ver able amount. hic hic h thedeductibletemporary differences h theassetsareputtousewhile no v ailable toallow allorpartof . ollo y . Amortisation isc wing initialrecognition, ver able amount, v harged e been hich y Defined benefitplan Staff retirementbenefits 5.9.1 5.9 5.9.2 .11F 5.11.1 F 5.11 5.10.10 5.10.9 5.10.8 5.10.7 5.10.6 5.10.5 ProfitondiminishingMusharaka isrecognisedonanaccrualbasis. 5.10.4 5.10.3 5.10.2 5.10.1 Rev 5.10 The Groupoperates anapprov T Defined contributionplan period exceed10%ofthehigherdefinedbenefitobligationandfairvalue oftheplanassets. cumulativ recognised asincomeorexpenseo is carriedoutateach year endusingtheProjectedUnitCreditMethod. Actuarial gainsandlossesare T employ of 10percent ofthebasicsalary. hav in theprofitand lossaccountofthecurrent period. cancelled orexpired. asset. Financial liabilitiesarede-recognisedwhen obligationspecifiedinthecontract isdisc right tofuturecashflows fromtheassetexpire oristransferred alongwiththeriskandreward ofthe to thecontractual provisions oftheinstrument.Financial assetsarede-recognisedwhen thecontr F Modar recognised o tr F Gains andlossesonsaleofin Di Profit onclassifiedfinancingisrecognisedreceiptbasis. partner /modariboratliquidationofMusharaka /Modar loss oronMusharaka andModaraba financingsisadjustedfordeclaration ofprofitby Mushar Pro account o Profit fromIjarah contracts enteredonorafterJanuary 01,2009isrecognizedintheprofitandloss inv Profit fromIjarah contracts isrecognisedonapatternreflectingconstantperiodicreturnthenet proportionate basis. Profit fromIstisn’a,DiminishingMusharaka, SalamandMusa T income withacorrespondingcredittodeferredMurabaha incomew on theportionofrevenue notdueforpayment isdeferredby accountingforunearnedMur Profit fromMurabaha isaccountedforonconsummationofMurabaha transaction. Ho w ee onissuanceoflettercreditandacceptanceisrecognised onreceiptbasisasgenerally the inancial assetsandfinancialliabilities inancial instruments inancial assetsandfinancial liabilitiesarerecognisedatthetimewhen theGroupbecomesaparty he contributiontothescheme ismadeonthebasisofactuarialrecommendations. Actuarial v he Groupoperates anappro he sameisthenrecognisedasrevenue onatimeproportionatebasis. ansaction consummateswithinanaccountingperiod. Fee onguarantees, ifconsideredmaterial,is hen theyaredone. vidend incomeisrecognisedwhen therighttorecei estment outstandinginaccordancewithInternational Accounting Standard17“Leases”. visional profitofMusharaka /Modaraba financingisrecognisedonaccrualbasis. Actual profit/ e beenpaid. enue recognition aba managementfeeisrecognisedonanaccrualbasis. ees. Equalmonthlycontributionsaremadebothby theGroupandemplo v e recognisedactuarialgainsorlossesfortheScheme attheendofpreviousreporting er thetermofcontract netofdepreciationexpenserelatingtotheIjarah assets. v er theperiodofguar T he contributionmadeby the Groupisrecognisedasanemplo An y gainorlossonde-recognition ofthefinancialassetandliabilitiesisrecognised v v ed fundedcontributoryprovident fundscheme forallofitspermanent estments areincludedinincomecurrently ed andunfundedgratuity sc T he Grouphasnofurtherpayment obligations oncethecontributions antee. v er thea ver age remainingusefulli v e dividend isestablished. aba. heme forallofitspermanentemplo w amah arerecognisedonatime hic v . es oftheemplo h isrecordedasaliability y ee benefitexpense y ees atther wever y ees, ifthe aluation harged, , profit abaha actual y ees. aka ate . 77 Annual Report 2009 78 Annual Report 2009 .13Deri 5.11.3 Offsetting offinancialinstruments 5.11.2 .3F 5.13 5.12 .5Provisions 5.15 F 5.14 is calculatedwithreferencetoquotedmarketprice.Deri Derivativ to eithersettleonanetbasis,orrealisetheassetandliabilitysimultaneously sheet when thereisalegally enforceable right toset-offtherecognisedamountsandGroupintends Financial assetsandfinancialliabilitiesareonlyoffsetthenetamountisreportedinbalance gains) areincludedinotherrecei en Items includedinthefinancialstatementsaremeasuredusingcurrency oftheprimaryeconomic Functional andpresentationcurrenc are undertakeninaccordancewiththeirtermsofemplo Tr Related partytr currently. are includedinotherliabilitiesthebalancesheet. is statednetoffexpectedreco and reasonablecertaintyexists fortheGrouptosettleobligation.Chargeprofit andlossaccount Pro Pro required tosettletheobligationandareliableestimate canbemadeoftheamountobligation. of apastevent anditisprobablethatanoutflow ofresources embodying economicbenefitswillbe Pro statements. Assets heldinafiduciarycapacityarenottreatedasassets oftheGroupinconsolidatedfinancial ruling onthebalancesheetdate. of guarantee denominatedinforeigncurrenciesareexpressedrupeetermsattherates ofexc are translated atcontracted rates. Contingentliabilities/commitmentsforlettersofcreditand Commitments foroutstandingforward foreignexchange contracts disclosedinthesefinancialstatements Commitments Tr Tr using forward exchange rates applicabletotheirrespecti at theexchange rates prevailing atthebalancesheetdate.F the dateoftransaction. Monetaryassetsandliabilitiesinforeigncurrenciesaretranslated intorupees F F whic oreign currencies oreign currency tr oreign currency transactions aretranslated intolocalcurrency attheexchange rates prevailing on iduciary assets ansactions withrelatedpartiesareatarm'slengthpricesexceptfortransactions withexecuti anslation gainsandlossesareincludedintheprofitlossaccount. anslation gainsandlosses vironment inw visions arereviewedateach balancesheetdateandareadjustedtoreflectthecurrent bestestimate. visions forguarantee claimsandotheroffbalance sheetobligationsarerecognisedwhen intimated visions arerecognisedwhen theGrouphasapresentlegalorconstructi v h istheGroup'sfunctionalandpresentationcurrenc atives e financialinstrumentsarerecognisedatfairvalue. Inthecaseofequityfutures,fairv ansactions hic ansactions h theGroupoperates. veries. v ables andderi y T he financialstatementsarepresentedinPakistani Rupees, vativ T es withnegati he resultantgainsandlossesaretakentoincome vativ yment. v y. e remainingmaturities. es withpositi orw ard exchange promisesarerev v e marketvalues (unrealisedlosses) v e marketvalues (unrealised v e obligationasaresult . v es that hange alued alue 5.19 Geogr 5.18.2 5.18.1 5.18 Deferred costs 5.16 5.17 T profit andlossaccount. T Assets acquiredinsatisfactionofclaims relating toitscorporate customers. It includesprojectfinance,exporttrade finance,Ijarah, guarantees andbillsofexc Commer medium enterprises. It includesretailfinancings,depositsandbankingservicesofferedtoitscustomerssmall Retail Banking It includesequity, foreignexchanges, commodities,own securitiesandplacements. Tr Business Segments segments. (geogr (business segment)orinproviding productsorserviceswithinaparticulareconomicen A segmentisadistinguishablecomponentoftheGroupthatengagedinproviding productsorservices Segment reporting assets arewrittendown totheirreco If such indicationexists,and where thecarryingamountexceedsestimatedreco of changes incircumstances indicatethatthe carryingamountoftheassetsmay notbereco These representpreliminary, formationandpre-operating costandexpensesincurred onissueofshares. of thenetrealizablevalue oftherelatedad T Impairment T he carryingamountofassetsisreviewedateach balancesheetdateforimpairmentw he Grouphas102(2008:102)br hese arebeingamortisedo he Groupoccasionallyacquiresassetsinsettlementofcertainfinancings. ading andSales aphical segment),w aphical Segments cial Banking T he Group'sprimaryformatofreportingisbasedonbusinesssegments. hic v er aperiodoffi h issubjecttorisksandrewards thataredifferentfromthoseofother anc ver hes /subbr able amounts. v ances andthecurrentfairvalue ofsuch assets. v e y ears. anc hes andoperates onlyinP T he resultingimpairmentlossistakentothe T hese arestatedatlo akistan. ver henev able amount, vironment er ev verable. hange ents wer 79 Annual Report 2009 6. Accounting standards not yet effective

The following revised standards, amendments and interpretations with respect to approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation.

Standard or interpretation Effective date (accounting periods beginning on or after)

IAS 24 - Related Party Disclosures (Revised) January 01, 2011

IAS 27 - Consolidated and Separate Financial Statements July 01, 2009 (Amendment)

IAS 32 - Financial Instruments: Presentation - Classification of Rights February 01, 2010 Issues (Amendment)

IFRS 2 - Share-based Payments: Amendments relating to Group January 01, 2010 Cash-settled Share-based Payment Transactions

IFRS 3 - Business Combinations (Revised) July 01, 2009

IFRIC 14 - IAS 19 - The Limit on Defined Benefit Assets, Minimum January 01, 2011 Funding Requirements and their Interaction (Amendments)

IFRIC 17 - Distributions of Non-cash Assets to owners July 01, 2009

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments July 01, 2010

The Group expects that the adoption of the above revisions, amendments and interpretations of the standards will not materially effect the Group's financial statements in the period of initial application.

In addition to the above, amendments to various accounting standards have also been issued by the IASB as a result of its annual improvement project in April 2009. Such improvements are generally effective for accounting periods beginning on or after January 01, 2010. The Group expects that such improvements to the standards will not have any material impact on the Group's financial statements in the period of initial application.

7. Accounting judgments and estimates

The preparation of consolidated financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its

Annual Report 2009 judgment in the process of applying the Group's accounting polices. Estimates / judgments and associated assumptions used in the preparation of the consolidated financial statements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The estimates / judgments and associated assumptions are reviewed on an ongoing basis. Revision to the accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The changes in estimates made during the year and impact on the consolidated financial statements are disclosed in note 12.8.1. The estimates, judgments and assumptions that have significant effect on the consolidated financial statements are as follows:

Note

Classification of investments 5.3 & 11 Useful lives of assets and methods of depreciation / amortisation 5.6 & 13 Deferred taxation 5.8.2 & 14 Provision against non-performing financings 5.15 & 12.6 Defined benefit plan 5.9.1 & 33 80 10. 9.2 9.1 9. 8.2 8.1 8. Pro Mushar Commodity Murabaha -localcurrenc Sukuk Mur DUE FROMFINANCIAL INSTITUTIONS T 9.5 %perannum(2008:13to13.5annum). with maturitieslessthan3months. Represents depositswithvarious IslamicCommercial BanksunderMusharaka andModaraba arr -ondepositaccounts -oncurrentaccounts Outside P -ondepositaccounts -oncurrentaccounts In P B not carryany return. Cash Reserves Requirement.Balanceamountisa Includes Rs.63.506million(2008:23.35million)heldagainstCashReserve RequirementandSpecial Statutory LiquidityRequirementw Includes Rs.2,302.563million(2008:490.766million)heldagainstCashReserve Requirementand -localcurrency currentaccounts W from timetotime.Balanceamountisa -foreigncurrenc -localcurrenc W -foreigncurrency -localcurrency In hand CASH AND BALANCES WITH TREASURYBANKS he expectedprofitrate onthesearrangements isnil%(2008:3.75%)perannum. ALANCES WITH OTHER B ith NationalBankofPakistan in ith StateBankofPakistan in vision againstSukukMur akistan - USDollarClearing - SpecialCashReserv - CashReserves aka Placement akistan abaha y currentaccounts y depositaccounts abaha Account ANKS es hic T he expectedprofitrates onthesearrangements ranges between5%to y h istobemaintainedcomplywiththerequirementsofSBPissued v ailable totheGroupforitsoper v ailable totheGroupforitsoperations. Note Note Note 10.5 10.4 10.3 10.2 10.1 9.2 9.1 8.2 8.1 ations. December December December 4,018,813 4,025,231 1,800,000 2,225,231 2,218,813 2,059,808 1,555,287 1,539,272 4,217,520 3,599,483 2,564,617 31, 2009 31, 2009 31, 2009 504,521 504,521 618,037 946,374 117,355 829,019 16,015 88,492 23,205 29,484 35,803 (6,418) 6,418 Rupees in`000 Rupees in`000 Rupees in`000 - T hese depositsdo December December December 31, 2008 31, 2008 31, 2008 2,207,640 2,109,898 2,100,092 2,175,418 1,844,861 1,029,229 angements 330,557 933,929 781,475 40,351 40,351 40,351 97,742 89,832 40,351 34,157 11,469 95,300 13,842 7,910 9,806 8,846 - - - 81 Annual Report 2009 82 Annual Report 2009 1 INVESTMENTS 11. 11Inv 11.1 10.2 10.1 10.5 12.35%to12.50%(2008:Nil)perannumandha 10.4 10.3 against theoutstandingbalance. 16.75%) perannum. T - ModarbaCertificate Closedendmutualfund Openendedmutualfunds - MutualFunds - SukukCertificates Av T T Inv value ofin Less: provision fordiminutionin a Surplus onrevaluation of with profit. underlying commodityfromopenmarketthroughanagentandsellsittoafinancialinstitutiononcredit behalf andlatersellsthemondeferredMur agent underassetpurchaseagreementto The GroupenteredintoSukukMurabaha arrangement underwhichtheGroupappointsitsclientasan Group ismakingeffortstoreco T T Receiv Sales duringtheyear Opening balance Mur Recognised duringtheyear Deferred duringtheyear Opening balance Deferred Murabaha income Mur per annumandha Purc on No arr otal in otal in his representsprovisioning inrespectofSukukMurabaha arrangement withanin he GrouphasenteredintoMusharaka Placementarrangements underw he GrouphasenteredintoCommodityMurabaha agreementsunderw ailable forsalesecurities estments -netofpro estments by types angement amountstoRs28.5millionagainstw v ailable forsalesecurities abaha saleprice abaha recei hase price v v ed duringthey v estment atcost estments atmarketv ember 17,2008. T he profitrate ontheCommodityMurabaha ranges between11.5%and12.4%(2008:nil) v estments vable v vision e amaturityranging from2days to18da ear alue T he maturitydateofthedealwas February 08,2009. v er thebalanceoutstanding,ho Note 11.5 11.4 11.4 11.3 11.6 21.1 abaha basis. c ,0,0 6,606,408 - 6,606,408 ,2,3 6,622,637 - 6,622,637 ,5,4 6,653,447 - 6,607,637 6,653,447 - 6,607,637 the Group hase theunderlyingSukuksfromopenmarketonits 1,0)-(15,000) - (15,000) Held b ------(Rupees in'000)------628-16,208 - 16,208 580-45,810 - 45,810 v hic e amaturityranging from2days to4da 5- 15 h Rs22.1millionwas recei Giv y - 6 December 31, 2009 T collateral his carriesprofitatther en as ys. wev Note er theGrouphasmadeforpro Total

15 (23,713,772) (25,850,000) 6 hic 1,197,413 25,898,652 1,197,413 25,898,652 hic 40,351 2,225,231 December 31, 2009 ,6,8 - 4,861,883 h theprofitrate ranges from the Group ,4,3 4,842,435 - 4,842,435 ,5,4 4,858,643 - 4,858,643 ,5,4 4,858,643 - 4,858,643 h theGrouppur (42,232) Held b 40,351 32,413 48,652 32,413 48,652 v 628-16,208 - 16,208 7,002 estment bankundertaken v ,4 3,240 - 3,240

Rupees in`000 ed duringthey 11,765 582 - - ate of16.75%(2008: Giv y T - - - he totalmur December 31, 2008 en as - - - - ys. (1,782,099) (1,165,000) December 31, 2008 4,861,883 c 625,037 (43,596) hases an ear collateral abaha vision Total 582 .

The 11.3 12Investments by segments 11.2 Ijar Ijar Haq BahuSugarMillSukuk-2 Haq BahuSugarMillSukuk-1 T HBFC Sukuk LESCO Sukuk Optimus Sukuk Eden Developers Sukuk Eden HousingSukuk K Sui SouthernGasCompany Sukuk New Allied Electronics(LG)Sukuk Sitar Sitar T Second Sitara ChemicalsSukuk Shahmur Security LeasingSukuk Engro ChemicalSukuk Name ofthein T Surplus onrevaluation ofa Inv Amtex Sukuk P KSEW Sukuk-2 KSEW Sukuk-1 Second F Sukuk Certificates Less: provision fordiminutioninvalue ofin T -Modaraba Certificates -MutualFunds Other in -Sukukcertificates Participation T -Sukukcertificates Federal go Details ofin ak ElektronSukuk irst hree StarHosierySukuk hird Sitara ChemicalsSukuk ohat CementSukuk otal in otal in erm F ah GOPSukuk-3 ah GOPSukuk estments -netofpro a EnergySukuk-2 a EnergySukuk-1 WAPD WAPD ad SugarMillsSukuk and impairment Closed endmutualfund Open endedmutualfunds inance Certificates,Debentures,Bondsand v v A Sukuk estments atmarketv estments atcost vestments v A Sukuk v v estment inSukuk estee compan ernment securities: T erm Certificates: Note y vision v ailable forsalesecurities 11.3.26 11.3.25 11.3.22 11.3.21 11.3.20 11.3.19 11.3.18 11.3.17 11.3.16 11.3.13 11.3.12 11.3.24 11.3.23 11.3.15 11.3.14 11.3.11 11.3.10 11.3.1 11.3.8 11.3.7 11.3.6 11.3.4 11.3.3 11.3.5 11.3.2 11.3.9 alue December 31, 2009 134,000 20,000 12,000 15,000 42,000 50,000 40,000 84,000 11,000 10,000 65,000 54,000 27,000 59,000 92,800 38,000 60,000 60,000 2,500 8,000 2,000 4,000 5,000 Certificates 250 Number of - - vestments December 3,0 5,000 134,000 31, 2008 0005,000 10,000 5005,000 15,000 0005,000 10,000 5005,000 5,000 15,000 42,000 0005,000 50,000 40,000 4005,000 5,000 84,000 11,000 5,000 5,000 10,000 50,000 4005,000 5,000 54,000 27,000 9005,000 5,000 5,000 59,000 92,800 38,000 0005,000 60,000 5,000 50,000 ,0 100,000 2,500 ,0 5,000 5,000 8,000 2,000 ,0 5,000 5,000 4,000 5,000 5 1,000,000 250 - (Rupees) 100,000 au otCost Cost Value Face 5,000 Note 11.6 21.1 11.5 11.4 11.4 11.3 11.3 6,606,408 2,000,000 December 31, 2009 250,000 210,000 229,167 100,000 420,000 321,574 250,000 236,250 130,410 295,000 464,000 190,000 257,143 668,238 299,213 60,000 67,500 55,000 40,000 25,000 20,000 10,413 7,500 (Rupees in'000) - - 6,653,447 6,607,637 6,622,637 4,356,408 2,250,000 December 31, 2009 4,842,435 December (15,000) 31, 2008 5,0 nae Unrated Unrated 250,000 1,0 nae Unrated Unrated 210,000 0,0 B-A- A BBB- 250,000 200,000 2,0 AAA AA 420,000 AA AA 250,000 5,0 A- 250,000 7,0 A Withdrawn Withdrawn 270,000 130,410 9,0 A- Unrated Unrated Unrated 295,000 Unrated 464,000 190,000 0,0 +A+ A+ Unrated Unrated 300,000 Unrated Unrated 670,000 250,112 45,810 16,208 000-Unrated - 50,000 500-Unrated - 75,000 000UrtdUnrated Unrated 60,000 500A A+ A+ 75,000 000BB BBB+ BBB- 10,000 500DfutDefault AA- AA- Default 55,000 AA- AA- 40,000 37,500 000UrtdUnrated Unrated Unrated Unrated 20,000 20,413 - Rupees in`000 15 6 December 31, 2009 nae Unrated Unrated Instrument r December 31, 2008 4,861,883 4,858,643 4,858,643 4,592,435 250,000 - - 16,208 December 31, 2008 3,240 ating A- - A A A 83 Annual Report 2009 11.3.1 These carry profit at the rate of six months KIBOR plus 35 basis points (2008: six months KIBOR plus 35 basis points) receivable on semi-annual basis with maturity in October 2012. The principal will be repaid on maturity. The rentals are backed by Government of Pakistan's Sovereign Guarantee. At December 31, 2009, these had a market value of Rs. 311,610 thousand (2008: Rs. 259,487 thousand).

During the year, the Group purchased 10,000 certificates on June 25, 2009 of WAPDA- I Sukuk through a negotiated transaction for a cash consideration of Rs. 50.228 million having face value of Rs. 50 million. These certificates were available in the seller's Central Depository Company (CDC) account and on completion of the transaction were transferred to the Group's CDC account. A periodic Ijarah Rental due on October 22, 2009, was not paid to the Group on the plea that there exists certain discrepancy with respect to ownership of the asset. The Group and the legal advisers are of the view that the security and the rental purchased through CDC is deemed to be legally bona fide and the issuer itself in the FIR has conceded that a fraud was committed in its office by certain employees, some of whom have been arrested and part of the money have been recovered. The Group's legal advisor is certain that it will be able to recover the rental therefore no provision has been made in these financial statements. Additionally the Group is also evaluating legal options against the seller for gross misrepresentation, willful omission of material fact and outright deception and as the first step has lodged a formal complaint with its Sharia'h Board.

11.3.2 These carry profit at the rate of six months KIBOR minus 25 basis points (2008: six months KIBOR minus 25 basis points) receivable on semi-annual basis with maturity in July 2017. The principal will be repaid in 12 equal semi-annual installment with first installment falling due on the 54th month from the first drawdown date. The rentals are backed by Government of Pakistan's Sovereign Guarantee. At December 31, 2009, these had a market value of Rs. 674,154 thousand (2008: Rs. 676,700 thousand).

11.3.3 These carry profit at the rate of six months KIBOR plus 40 basis points (2008: six months KIBOR plus 40 basis points) receivable on semi-annual basis with maturity in November 2015. The principal will be redeemed in eight semi-annual installments starting from May 2012. The rentals are backed by Government of Pakistan's Sovereign Guarantee.

11.3.4 These carry profit at the rate of six months KIBOR plus 40 basis points (2008: six months KIBOR plus 40 basis points) receivable on semi-annual basis with maturity in November 2015. The principal will be repaid on maturity. The rentals are backed by Government of Pakistan's Sovereign Guarantee.

11.3.5 These carry profit at the rate of three months KIBOR plus 175 basis points (2008: three months KIBOR plus 175 basis points) receivable quarterly based on Diminishing Musharaka mechanism with maturity in September 2012. There is an early purchase option available to the issuer after 30 months from the date of issue.

11.3.6 These carry profit at the rate of three months KIBOR plus 200 basis points (2008: three months KIBOR plus 200 basis points) receivable quarterly based on Diminishing Musharaka mechanism with maturity in October 2012. There is an early purchase option available to the issuer after 2 years from the date of issue.

Annual Report 2009 11.3.7 These carry profit at the rate of six months KIBOR plus 150 basis points (2008: six months KIBOR plus 150 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in September 2015. Upto two consecutive, equal semi-annual installments, the first such installment falling due on the 90th month from the date of the first contribution under the facility. 11.3.8 These carry profit at the rate of six months KIBOR plus 195 basis points (2008: six months KIBOR plus 195 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in September 2012. The principal to be redeemed in eight equal semi-annual installments commencing from the 18th month from the issue date.

11.3.9 These carry profit at the rate of six months KIBOR plus 225 basis points (2008: six months KIBOR plus 225 basis points) receivable semi-annually based on Diminishing Musharaka mechanism with maturity in September 2012. There is an early purchase option available to the issuer after 2 years from the date of issue.

84 11.3.10 11.3.12 11.3.13 11.3.11 11.3.14 11.3.15 11.3.16 11.3.22 11.3.21 11.3.17 11.3.20 11.3.19 11.3.18 in December2012. plus 170basispoints)receivablequarterlybasedonDiminishingMusharaka mechanism withmaturity These carryprofitattherate ofthreemonthsKIBORplus170basispoints(2008: plus 195basispoints)recei T disbursement with“NoEarlyP plus 195basispoints)recei T commencing fromthe6thmonthdateofissue. maturity inJuly 2012. plus 100basispoints)recei T in December2012. date ofissue. plus 220basispoints)recei T maturity inJuly 2012. commencing fromthe6thmonthdateofissue. in December2012. plus 20basispoints)recei T of disbursement. maturity inDecember2012. plus 180basispoints)recei T months thereafter. first payment fall dueattheendofsixmonthsfromissuedateandsubsequently afterevery six plus 325basispoints)recei T plus 100basispoints)recei T from theissuedatewithmaturity. plus 250basispoints)recei T maturity inJune 2013. the sixmonthsfromissuedatewithmaturityinMay 2014. due notlaterthantheendoffifteenmonthsfromlast dr 10 basispoints)recei T plus 125basispoints)recei T with maturityinMay 2010. plus 300basispoints)recei T of disbursement. maturity inDecember2012. in April 2015. hese carryprofitattherate ofthreemonthsKIBORplus100basispoints(2008: hese carryprofitattherate ofthreemonthsKIBORplus220basispoints(2008: hese carryprofitattherate ofthreemonthsKIBORplus325basispoints (2008: threemonthsKIBOR hese carryprofitattherate ofthreemonthsKIBORplus300basispoints(2008: hese carryprofitattherate ofsixmonthsKIBORplus90basispoints(2008: sixmonthsKIBORplus hese carryprofitattherate ofthreemonthsKIBORplus20basispoints(2008: hese carryprofitattherate ofsixmonthsKIBORplus195basispoints(2008: hese carryprofitattherate ofsixmonthsKIBORplus195basispoints(2008: hese carryprofitattherate ofsixmonthsKIBORplus180basispoints(2008: hese carryprofitattherate ofsixmonthsKIBORplus100basispoints (2008: sixmonthsKIBOR hese carryprofitattherate ofsixmonthsKIBORplus250basispoints(2008: hese carryprofitattherate ofsixmonthsKIBORplus125basispoints(2008: T he principalwillberepaidin24consecuti T T here isanearlypur he sukukswerefullymatured duringthey T v here isanearlypur T able semi-annually. here isanearlypur T T v he principalwithberedeemedintenequalsemi-annualinstallments he principalwillberedeemedintenequalsemi-annualinstallments v v able quarterlybasedonDiminishingMusharaka mechanism withmaturity able quarterlybasedonDiminishingMusharaka mechanism withmaturity able quarterlybasedonDiminishingMusharaka mechanism withmaturity v v v v v v v v able semi-annuallybasedonDiminishingMusharaka mechanism with able semi-annuallybasedonDiminishingMusharaka mechanism with able semi-annuallybasedonDiminishingMusharaka mechanism with able semi-annuallybasedonDiminishingMusharaka mechanism with able semi-annuallybasedonDiminishingMusharaka mechanism with able quarterlyinarrearsbasedonDiminishingMusharaka mec able semiannuallybasedon DiminishingMusharaka mechanism. able semi-annuallyandthefirstsuch profitpayment willfallduefrom T T a here isanearlypur here isanearlypur yment P T he principalwillberepaidatmaturityin April 2010. c hase optiona enalty”. c hase optiona T he firstpayment shallfalldueattheendofsixmonths c hase optiona c c hase optiona hase optiona v ailable totheissuerafter1year ofdisbursement. v v ailable totheissuerafter2y e quarterlyunits. awdown. v ailable totheissuerafter3years of ear. v v ailable totheissuerafter2y ailable totheissuerafter2y T he firstsuch unitfalling ears fromthe hanism ears ears The 85 Annual Report 2009 86 Annual Report 2009 11.5 161P 11.6.1 P 11.6 11.3.25 11.3.24 11.3.23 11.4 11.3.26 Name ofthein MeezanBalancedFund Closed endmutualfund Sukuk certificates- Closing balance Reversals Charge forthey Opening balance MeezanIslamicIncomeFund Modar Certificates MeezanIslamicFund Al MeezanCashFund Open endedmutualfunds Units Name ofthein Details ofin T T Mushar six monthsfromtheissuedateandsubsequentlyafterev plus 325basispoints)receivablesemi-annually, thefirstprofitpayment shallfalldueattheendof These carryprofitattherate ofsixmonthsKIBORplus325basispoints(2008: Mushar months fromtheissuedateandsubsequentlyafterevery threemonthsthereafter, basedonDiminishing plus 350basispoints)recei T Details ofin T market value ofRs.252,482thousand. thousand. are backed by Go of Pakistan's So T articulars ofprovision inrespectoftypeandsegment articulars ofprovision fordiminutioninvalue ofin -Bills. -Bills plus45basispoints. hese carryprofitattherate ofthreemonthsKIBORplus350basispoints(2008: he profitrate onthesesukukscomprisesofsixmonthsweighteda he profitrate onthesesukukscomprisesofsixmonthsweighteda aba Al-Mali (relatedparty) T aka mec aka mechanism. he principalwillberedeemedonmaturityinMar vestee v estee Fund v v estments inModaraba Certificates estments inMutualFunds v hanism withmaturityin ear ereign Guarantee. At December31,2009,thesehadamarketvalue ofRs.2,040,000 v ernment ofPakistan's So Av ailable forsalesecurities 1,000 T 092008 2009 092008 2009 Per 107 he sukukswerefullymaturedduringthey 97 31 ,4,7 ,4,7 ,7 ,7 62816,208 16,208 3,373 3,371 2,342,177 2,342,177 13 13 99 centage holding v Number of T able quarterly, thefirstprofitpayment shallfalldueattheendofthree he principalwillberedeemedonmaturityinSeptember2011. Units Units - - - - A ugust 2011. v 2009 2009 ereign Guarantee. At December31,2009,thesehada 21 15 6 5 5 5 (Rupees in'000) Certificates Mark v Number of vestments alue ery sixmonthsthereafterbasedonDiminishing 2008 2008 ------c h 2012. 2009 2009 (Rupees in'000) Market v 21 15 Rpe n'0)Longterm/shortterm (Rupees in'000) T ver ver 6 5 5 5 hese arebacked by Go ear. Cost age yieldofsixmonthmarket age yieldofsixmonthmarket alue 2009 15,000 15,000 15,000 15,000 2008 2008 M - AM2 ------Rupees in`000 - - 3 Star AA (f) A+ (f) 2009 2009 (Rupees in'000) Entity r Cost 2008 vernment ating These 2008 2008 ------

12.2 12.1 12.4 12.3.2 12.3.1 Particularsoffinancings 12.3 2 FINANCINGS 12. -Specific Provision fornon-performingfinancings Financings -gross underIFAS 2 Net bookvalue ofassets/investmentinIjarah -General inPakistan Net investmentIjarah financings Purchase price Murabaha saleprice Export RefinanceScheme. Istisn'a includesfinancingsamountingtoRs.42.020million(2008:nil)againstunderIslamic Murabaha underIslamicExportRefinanceScheme. Murabaha includesfinancingsamountingtoRs.169.186million(2008:254.54million)against Financings -netofprovision - Financings toemplo - Musa - Against Bills-Musa under Bank's Human Resource Policy. This includesRs. 1.609million(2008:Rs.0.939 million)mark-upfree financingtoemployeesad vanced Recognised duringtheyear Deferred duringtheyear Opening balance Deferred murabaha income - Against Bills-Mur - DiminishingMusharaka -Others - DiminishingMushraka -Housing Long-term (foroveroneyear) Short-term (foruptooneyear) In foreigncurrency In localcurrency Received duringtheyear Sales duringtheyear Opening balance Murabaha receivable - Istisn'a - Mur Financings -inPakistan abaha w amah abaha wamah yees 12.4 &12.9 12.1 &12.2 12.7 12.6 12.5 12.1 Note 6,687,460 13,531,861 4,896,030 12,114,632 6,527,531 13,282,152 (7,445,953) (5,882,021) 13,531,861 13,531,861 13,531,861 1,791,430 1,230,034 6,289,235 7,698,756 2,824,849 3,889,569 4,180,471 2,363,736 6,289,235 581,505 4,180,471 7,698,756 2,363,736 December December 4,928,616 8,603,245 31, 2009 31, 2009 (230,928) (259,075) 187,195 150,000 200,664 300,052 255,184 252,803 761,743 255,184 252,803 (18,781) 38,044 87,584 81,312 7,948 Rupees in`000 Rupees in`000 - -

(6,034,051) (4,507,004) December December 6,687,460 3,808,405 2,879,055 6,687,460 6,687,460 1,457,729 2,363,736 31, 2008 31, 2008 - (141,687) (205,644) 682,141 184,797 (18,242) 87,584 3,387 3,576 - - 87 Annual Report 2009 88 Annual Report 2009 12.8 12.7.1 12.7 26IjarahAssets 12.6 Net investmentIjarah financings 12.5 Charge fortheyear Opening balance Particulars ofprovision againstnon-performingfinancings Rs.118.662 million). have beenclassifiedundersubjectivevaluation, resultinginaprovision ofRs.64.411million(2008: Included inlosscategoryareassetsamountingtoRs.218.981 million(2008:Rs.118.662million)which Reversals Closing balance Loss Doubtful Substandard Category ofclassification Loss Doubtful Substandard Category ofclassification non-performing statusasfollows: Financings includesRs.788.665million(2008:186.093million)whichhavebeenplacedunder Vehicles Plant andMachinery Ijarah payments Present value ofminimum Future rentalincome Minimum Ijarah pa yments Residual value Ijarah rentalsreceivable ------(Rupees'000)------(Rupees'000)------oetcOesa oa oetcOesa oa oetcOesa Total Overseas Domestic Total Overseas Domestic Total Overseas Domestic oetcOesa oa oetcOesa oa oetcOesa Total Overseas Domestic Total Overseas Domestic Total Overseas Domestic 11671167-141,687 - 141,687 141,687 - 141,687 186,093 - 186,093 12861286-122,866 - 122,866 122,866 - 122,866 122,866 - 122,866 8,6 8,6 230,928 788,665 - 788,665 6,8 6,8 134,913 363,181 - 363,181 4,7 4,7 50,501 142,878 - 142,878 8,0 8,0 45,514 282,606 - 282,606 1,9 272-12,792 - 12,792 12,792 - 6,029 12,792 12,059 51,168 - - 12,059 51,168 Classified Financings Classified Financings 1242 2823 (330,685) - (228,233) (102,452) Not later 01, 2009 hnoelessthan than one 1,791,430 - 1,532,429 259,001 1,230,034 - 726,832 503,202 8,0 1,834,508 382,509 1,560,719 - 955,065 605,654 1,851,992 - 1,469,483 382,509 1,241,441 - 652,768 588,673 depreciation value as December Charge / January December (deletions) January 180,089 539 159,929 18,242 179,550 141,687 249,709 18,781 230,928 365,025 - 365,025 - 319,278 - 302,297 16,981 (90,309) sa diin A tAsat Asat Additions/ As at year 89,780 539 89,241 pcfcGnrlTtlSeii eea Total General Specific Total General Specific ------Rupeesin'000------Rupeesin'000------2,6 926187,195 134,232 29,266 20,873 29,266 20,873 - - 216,461 155,105 61,356 216,461 155,105 61,356 - - - December 31,2009 ------Rupeesin'000------Later than fi December 31,2009 one and v COST e y asyears ears Ov 3,20 at 31, 2009 Impairment 01,2009 31, 2009 er fi (90,309) - eTotal ve December 31,2008 December 31,2009 iinRqie Provision Required iinRqie Provision Required 609609- 6,029 6,029 - 83383352,963 8,393 8,393 - 20982098-230,928 - 230,928 230,928 - 14931493-134,913 - 134,913 134,913 - 5,0 051-50,501 - 50,501 50,501 - 4,1 554-45,514 - 45,514 45,514 - December 31,2009 DEPRECIATION 1358 3209 (425,587) - (302,079) (123,508) Notlater hnoelessthan than one 147,115 9,154 137,961 914130,556 9,154 121,402 1,4 159,929 18,242 141,687 (16,559) - (16,559) asyears five years year 29,373 9,088 20,285 December 31,2008 Later than December 31,2008 one and Rate of Book As at Provision Held Provision Held December Ov 31, 2009 er fi eTotal ve 2,217,017 20-33.33 20-33.33 6,029 % 13.1 12.8.3 12.8.2 Effect ofchange inaccountingestimate 12.8.1 3 OPERA 13. 29P 12.9 Adv Equipments Ci Intangible assets Property andequipment Capital w In localcurrenc other persons Bank orany ofthemeithersev F associatedcompaniesetc. In foreigncurrenc Capital w articulars offinancingstodirectors, inancings dueby directors,executi P financings. of thePrudentialRegulationsforConsumerFinancing issuedby SBPandforpotentiallosseson T performing financingsandaconsequentdecreaseinlossbeforetaxationby Rs.124.553million. c FSV ofpledgedstocks and mortgagedcommercial andresidentialproperties. performing financings.Previously, theBankswereonlyallowed totakethebenefit of30percent of industrial propertyheldascollateral by theGroup indeterminingtheamountofprovision againstnon- of 40percent ofF respect ofprovisioning againstnon-performingfinancings. The SBP, videBSDCircular No.10,datedOctober20,2009,hasamendedPrudentialRegulations in vil w articulars ofprovisions againstnon-performingfinancings hange inregulationhasresultedareductionprovisioning ofRs.124.553millionagainstnon- he Grouphasmaintainedageneral reserve (provision) inaccordancewiththeapplicablerequirements Repayments F Balance atbeginningofthey Balance atendofthey ances tosuppliersandcontr inancing granted duringtheyear orks TING FIXED ork-in-progress ork-in-progress y y or ASSETS ced Sale ear 3,2 871249,709 18,781 230,928 3,2 871249,709 18,781 230,928 pcfcGnrlTtlSeii eea Total General Specific Total General Specific V er alue (FSV)ofpledgedstocks andmortgagedcommercial, residentialand actors - - ally orjointlywithan ear ------Rupeesin'000------v December 31,2009 es orofficersofthe y - - - 13.3 13.2 13.1 T Note he revisedregulationsallo 4,8 822159,929 18,242 141,687 4,8 822159,929 18,242 141,687 2,375,515 2,250,027 December 31, 2009 138,269 200,664 300,052 105,147 December 31,2008 (38,881) 20,341 20,000 20,341 Accordingly Rupees in`000 341 - w thebenefit December 1,889,543 1,619,930 , theabo 31, 2008 250,240 190,592 128,827 112,592 200,664 250,240 (40,755) 20,000 39,648 19,373 - ve 89 Annual Report 2009 90 Annual Report 2009 13.3.1 13.3 13.2.1 computerequipments Property andequipment 13.2 Additions representIslamic BankingSoftware andLicense acquiredduringthey Computer softw from thecarryingamount. T Computer software 13.3.1 Vehicles Electrical, officeand Furniture andfixture Intangible assets Buildings onleaseholdland Vehicles computerequipments Electrical, officeand Furniture andfixture Buildings onleaseholdland F ree holdland he fairvalue ofpropertyandequipmentasperthemanagementestimatesisnotmateriallydifferent are Note ------Rupeesin'000------Rupeesin'000------Rupeesin'000------Rupeesin'000------1,874,459 aac tAdtos/ aac tBlnea hre/Balanceat Charge/ Balanceat Balanceat Additions/ Balance at aac tAdtos/ aac tBlnea hre/Balance at Charge/ Balanceat Balanceat Additions/ Balance at aac tAdtos/ aac tBlnea hre/Balance at Charge/ Balanceat Balanceat Additions/ Balance at aac tAdtos/ aac tBlnea Charge/ Balanceat Balanceat Additions/ Balance at 01,2008 01,2009 01,2008 01,2009 aur dltos December (deletions) January aur dltos December (deletions) January aur dltos December (deletions) January J 6,5 2,1 9,7 21,426 690,370 124,918 565,452 962,116 5,9 9,1 5,1 17,384 550,016 391,918 158,098 162,609 109,741 690,370 524,332 550,016 nay(eein)December (deletions) anuary 7076103,2 ,7 ,7 3841,7 20 19,373 13,854 5,676 8,178 33,227 6,160 27,067 33,227 5974,8 0,4 15,435 109,741 43,184 75,957 275,128 - 361,798 111,227 921,818 (9,475) 936,655 179,488 252,609 206,109 23,321 COST COST COST COST (4,890) (4,890) (9,400) (19) (75) ,7,5 98,397 1,874,459 ,0,2 254,529 2,806,224 3,20 1 08 01,2008 01,2008 31,2008 3,20 1 09 01,2009 01,2009 31,2009 3,20 1 08 rm01,2008 from 01,2008 31,2008 3,20 1 09 rm01,2009 from 01,2009 31,2009 4,3 13,854 144,435 2,3 44,152 524,332 2,7 28,047 128,172 50,414 869,858 7,4 126,564 776,941 5,2 49,504 756,125 275,128 J J J J anuary anuary nayacquired anuary nayacquired anuary - - - December 31,2008 December 31,2008 December 31,2009 December 31,2009 AMORTISATION AMORTISATION DEPRECIATION DEPRECIATION subsidiary */ subsidiary */ (adjustment) (adjustment) 161,158 303,420 171,913 25,453 28,988 17,574 32,120 82,476 24,123 39,380 68,004 (1,752) (1,752) (5,026) (4,962) (19) (64) Balance at J J J J 5,2 1,619,930 254,529 2,6 9,6 25 397,768 126,564 5,9 2,250,027 556,197 9,7 7,6 25 478,464 298,477 1,0 3,1 10 638,617 117,508 nayv anuary nayv anuary nayv anuary nayv anuary 928151720 105,147 39,288 04469965 639,956 50,414 8078,9 20 81,694 28,047 954505210 500,512 49,504 0487,5 20 77,754 5 50,418 780,064 89,794 ear. eebr% December eebr% December eebr% December eebr% December 31, 2008 31, 2009 31, 2008 31, 2009 7,2 - 275,128 alue at alue at alue at alue at Book Book Book Book depreciation amortisation amortisation depreciation Rate of Rate of Rate of Rate of Details ofpropertyandequipmentdisposed-off 13.4 14. 14.2 14.1 The following assetsweredisposed-offduringtheyear: Suzuki Cultus Suzuki Liana Vehicles Suzuki Mehr Acceler Deferred taxcreditsarisingdueto Toy tax assetsasreportedinthesefinancialstatements. the sameamountingtoRs10.134millionhasbeencarried forward andtreatedas additiontodeferred Ijar pro dated January 13,2010ofICAP onthesubjectmatter, isconfident abouttheallo However to theprovision fornon-performingfinancingsmadepriortotheapplicability oftheabo said amendmentsmadeinthetaxlaw donotexplicitlyprovide foratransitional mechanism withregard sheet exposuresapplicablefromtaxyear 2010(accountingyear December31,2009)andonwards. Amortisation ofDeferredcost as statedinnote5.8.2abo Act, 2009,regardingtaxallo During they assets couldberealised. estimates thatsufficienttaxableprofitswould bea T Surplus onrevaluation ofassets Pro Minimum taxcreditcarriedforw Av Deferred taxdebitsarisinginrespectof Pro DEFERRED he abo ailable taxlosses ota Corolla ah financings vision againstnon-performingfinancings vision againstin visions relatingtopriorperiodsw ated taxdepreciation v e netdeferredtaxassethasbeenrecognisedinaccordancewiththeGroup'saccountingpolic , theGroupuponopinionofitstaxadvisor andintheviewofCircular no.01/2010 an T AX ear , amendmentswerebroughtintheIncome ASSETS v estment andlending Original 1,018 cost 636 709 430 v ------(Rupees'000)------e. w T he managementbasedonfinancialprojectionspreparedduringthey ability ofprovision againstnon-performingfinancingsandoff-balance ard Accumulated depreciation hic 382 272 594 47 h approximatestoRs28.954million,hencethetaximpact of v Book 6 6 uto Imr Insurance Auction 450 563 254 662 5 246 158 2 424 424 v leproceeds alue ailable infutureagainstw Disposal T 14.2 ax Ordinance,2001throughtheF Note Bank P Bank P Employee disposal Mode of Claim CEO olic olic December (273,818) (109,108) (403,591) 31, 2009 556,350 358,625 762,216 727,219 (16,034) y - Hasan Aziz Bilgr y - 10,177 17,324 (4,631) 7,496 hic Rupees in`000 Sarw EFU General Insurance Ltd P articular ofbuy h thesedeferredtax an Sheikh ar Imam w v e amendments. ability ofsuc December 31, 2008 (195,102) (280,067) 276,283 497,697 (82,960) 53,876 ami (1,135) ers 4,777 inance (870) - The ear, h y 91 Annual Report 2009 92 Annual Report 2009 53Goodwill 15.3 15.2 15.1 5 OTHERASSETS 15. Amortisation charge forthey Amortisation andimpairment Arising onacquisition As at1stJ - BankIslamiModaraba In Unit (CGU): Good Impairment testingofgood Net bookvalue asatDecember31 T - BankIslamiModarbaIn Balance atthebeginningofy Represents ad Less: Amortised duringthey Balance attheendofy Ad otherprepa Other recei Car Ijarah Repossession Insur Goodwill Deferred costs Branc Adv Adv Profit /returnaccruedinforeigncurrency Profit /returnaccruedinlocalcurrency Deferred costs he carryingamountofgoodwill allocatedtotheCGUisasfollo v ance taxation(payments lesspro ance againstfinancings ances, deposits,ad ance claimrecei will acquiredthroughbusinesscombinationhasbeenallocated tothefollowing CashGener h adjustmentaccount anuary vable yments v ance gi vable v v en inrespectofMurabaha andIjarah financings. ance rentand v v estments Limited ear estments Limited will ear ear ear vision) 15.2 15.4 15.3 15.1 Note ws: December December December 1,241,621 31, 2009 31, 2009 31, 2009 115,043 397,285 547,456 59,232 59,232 59,232 59,232 36,252 16,083 20,169 71,127 12,169 59,232 20,169 15,180 3,960 Rupees in`000 Rupees in`000 Rupees in`000 - - - - December December December 31, 2008 31, 2008 31, 2008 1,032,375 181,890 206,613 153,600 343,899 59,232 59,232 59,232 59,232 52,271 16,019 36,252 11,048 14,816 59,232 36,252 21,997 2,951 ating - - 77 17. 16. 15.4 Outside Pakistan In Pakistan Di Di F Income fromeducationdi anticipated marketconditions. Outside P Management feesha Management fees - Discountr - Dividend Income; - Incomefromeducationdi - Managementfees; credits. Includes Rs.nil(2008:190.781million)inrespectofpayment tovarious banksagainstletterof aver calculated usingthecapitalassetpricingmodel.Discountrates arecalculatedby usingtheweighted Discount rate reflectsmanagementestimatesoftherate ofreturnrequiredforthebusinessandare Discount r on thebasisofhistoricalperformanceandprevailing industrytrends. T In P recover Management believes thatreasonablepossiblechanges inotherassumptionsusedtodeterminethe Sensiti T Discount rate -discreteperiod fifth year periodareextrapolated usingaterminal growth rate. DUE BILLS P management co on av The recover Key assumptionsusedinvalue inusecalculation ee levels arebasedonexpectedfeesbenchmarked againstcomparable educationalinstitutions. erminal growth r he calculationofvalue inuseforthebusinessoperation ismostsensiti vidend Incomeonin vidend Income akistan age costofcapitalthecompan T O FINANCIAL INSTITUTIONS alue inusecalculation,usingcashflow projectionsbasedonbusinessplanappro vity tochanges inassumptions able amountoftheentitywillnotresultinanimpairmentgood AYABLE akistan ate able amountofthebusinessoperation ofthecashgener ate. v ering afi ate v e beenassumedat10percent perannumbasedonprevailing industrytrendsand v estment intheModarabas hasbeenprojectedontheexpectedreturnsestimated v vision e year period. vision; y. T he discountrate appliedtocashflow projectionsbeyond the Note 17.3 T he following rates arebeingused: ating unithasbeendeterminedbased v e tothefollowing assumptions: will. December 31, 2009 156,160 156,160 485,608 485,608 10.00% 19.40% 2009 Rupees in`000 - - December 31, 2008 v ed by the 245,939 245,939 353,646 353,646 16.50% 2008 8.00% - - 93 Annual Report 2009 94 Annual Report 2009 9 O 19. 81P 18.1 18. 17.3 17.2 Particulars ofduetofinancialinstitutions 17.1 Particulars ofduetofinancialinstitutionswith Pay Deferred Murabaha Income-CommodityMur Deferred Murabaha Income-financings Accrued expenses Unearned feesandcommission Profit /returnpa Charity pa Sundry creditors Security depositsagainstIjar Unearned rent Pay Profit /returnpa Others W Retention money In foreigncurrencies In localcurrenc against collater expected profitrate ranges from6.5%to7.0%perannum(2008:annum)andaresecured Margin accounts-non-remuner Current accounts-non-remuner Sa F Customers Represents Musharaka contributionsb Remunerativ F Non remuner Long-term Short-term In localcurrency respect tocurrencies In foreigncurrencies DEPOSITS AND OTHER articulars ofdeposits ixed deposits inancial institutions THER LIABILITIES vings deposits ithholding taxpa able todefinedbenefitplan able todefinedcontributionplan yable e deposits ativ al. y y y e deposits able inlocalcurrenc able inforeigncurrenc yable ACCOUNTS ah ative ative y y SBPagainstIslamicExportRefinanceSc y bh 10.3 abaha Note 12.2 19.1 33 27,911,651 27,334,319 12,652,075 27,513,175 27,911,651 December December 7,265,287 7,555,064 31, 2009 31, 2009 111,936 382,822 184,767 918,705 577,332 126,118 398,476 272,358 156,160 156,160 156,160 156,160 81,312 37,411 52,854 27,600 11,929 40,749 7,002 5,887 1,096 1,187 4,831 8,071 Rupees in`000 Rupees in`000 - - - heme. 12,412,598 12,200,330 12,402,443 12,412,598 December December T 582 31, 2008 31, 2008 2,865,180 6,500,115 2,846,687 hese carry 379,357 127,625 818,421 212,268 190,461 245,939 245,939 245,939 245,939 62,972 87,584 18,820 37,586 10,358 52,560 28,539 10,155 6,096 2,294 2,178 1,852 9,910 245 - - 18 22Transaction-related contingent liabilities 22.2 Surplus onrevaluation ofavailableforsalesecurities 21.1 SURPLUS ONREVALUATIONOF ASSETS -NETOFDEFERREDTAX 21. 21Trade-related contingentliabilities 22.1 CONTINGENCIES AND COMMITMENTS 22. 20.2 01A 20.1 20. 19.1.2 19.1.1 Charity fund 19.1 -Others -Government -Banks Guarantees favouring Modaraba certificates Sukuk Certificates Acceptances Import lettersofcredit Less: Relateddeferredtaxliability 527,967,898 527,967,898 527,967,898 ------Number ofshares------at any timeduringthey Charity was notpaidtoany individual /organisationinw During they Balance atthebeginningofyear 600,000,000 Balance attheendofy Pa Additions duringtheyear Issued, subscribedandpaid-up-capital SHARE C uthorised capital yment /utilizationduringthey 092008 2009 092008 2009 - Sharespendingissuance 100,000,000 - Number ofshares - APITAL ear , managementpaidc 0,0,0 OrdinarysharesofRs.10/-eac 600,000,000 527,967,898 427,967,898 320,000,000 107,967,898 ear. ear ear - Openingbalance - Issuedduringthey Fully paidincash Ordinary sharesofRs.10eac harity ofRs.nil(2008:2.763million). ear hic Note h adirectororhisspousehadany interest h h - 5,279,679 5,279,679 5,279,679 6,000,000 December 31, 2009 ------Rupeesin'000 ------Rupeesin'000 104,597 426,740 141,141 643,793 353,063 (12,437) (16,034) 16,075 58,247 426,982 98,079 3,240 45,810 29,776 8,071 6,219 1,852 2009 2009 Rupees in`000 1,000,000 - 245,000 - -

December 5,279,679 4,279,679 1,079,679 3,200,000 6,000,000 (12,835) 31, 2008 405,055 (1,135) (2,763) 2,105 1,852 1,791 2,824 2008 2008 95 Annual Report 2009 96 Annual Report 2009 5 CAPIT 25. 22.7 22.5 Commitments fortheacquisitionofoperating fixedassets 22.4 Commitments inrespectofpromises 22.3 24. 22.6 23. claimhasbeenmadeintheinterimcondensedfinancialstatementsofsubsidiary Sukuk certificates Mutual fundunits Shares -Listed costing Rs2,972,822was disputedby aperson. T rev T Purchase Other short-termduetofinancial institutions Deposits T Karac b disposal ofthesuit.Meanwhile asuitfiledby thesamepartyforwindingupofGroupwas dismissed injunction infa Bills forcollection withdrawn. Sale that partyintheHighCourtofSindhclaimingdamagesRs20,000,000. Others On deposits/placementswithfinancialinstitutions On In -Financial institutions -Customers On financingsto: AND PLACEMENTS EARNED suit filedagainsttheGroupwillalsobedismissed. Claim againstthegroupnotac Commitments inrespectoffinancingfacilities RETURN ONDEPOSITS AND OTHER DUESEXPENSED Other commitments PROFIT /RETURNONFINANCINGS, INVESTMENTS he Groupmakescommitmentstoextendfinancingsinthenormalcourseofitsbusinessbutthesebeing he managementandtheGroup'sla he ownership oftheGroupinrespectits y theHighCourt. After dismissalthepartyhasnow filedasuitagainsttheGroupinBankingCourt, ocable commitmentsdonotattr hi, claimingRs19,200,000. v AL GAIN/(LOSS)ONSALE OFSECURITIES estments ina v our oftheGrouprestraining thepersontodealwithsharespendinghearingand v ailable forsalesecurities kno wledged asdebt act any significantpenalty orexpenseifthefacilityisunilater wy ers areoftheopinionthatGrouphasastrongcaseand v T estment in400,000certificatesofModaraba he Grouprejectedthisclaimandfiledasuitagainst Accordingly - , noprovision inrespectoftheabo December December December 1,215,019 1,203,527 1,021,395 2,198,633 1,070,568 31, 2009 31, 2009 31, 2009 T 177,235 899,566 218,425 he HighCourtgranted an 11,492 16,848 10,074 49,173 2,356 2,356 1,726 8,099 Rupees in`000 Rupees in`000 Rupees in`000 - - . December December December 31, 2008 31, 2008 31, 2008 1,472,425 107,126 723,685 704,334 717,131 558,206 140,192 767,277 31,273 19,351 32,744 23,771 50,146 Al-Mali 5,527 3,670 1,975 6,750 - ally ve 9 TAXATION 29. 8 OTHERCHARGES 28. 72Amortisation 27.2 71Auditors'remuneration 27.1 7 ADMINISTRA 27. 6 OTHERINCOME 26. - Current For theyear - Deferred Others Penalties imposedby theStateBankofPakistan Deferred costs Intangible assets Out-of-pocket expenses Tax services Special certificationsandsundryadvisory services Review ofhalfyearly condensedfinancialstatements Audit fee Others Vehicle runningandmaintenance Fees andSubscription Remuneration toShariahBoard Travelling andconveyance Broker Security servicec Entertainment expense CDC andshareregistrar services Amortisation Depreciation A Adv Stationery andprinting Repairs andmaintenance Communication Legal andprofessionalc Rent, taxes,insurance andelectricity Insur Non-executi Contribution todefinedcontributionplan Salaries, allo Charge fordefinedbenefitplan Others Gain ondisposalofpropertyandequipment-net Gain onterminationofIjarah financing Rent onProperty uditors' remuneration ertisement andpublicity ance onconsumercarijar age andcommission v w e directors'fees TIVE EXPENSES ances andotherbenefits harges harges ah Note 15.2 13.3 27.2 13.2 27.1 35 33 1,760,047 December 31, 2009 303,421 106,150 292,396 535,210 (14,393) 82,847 97,240 10,617 41,536 16,083 25,453 31,631 30,315 69,651 11,882 47,505 13,888 41,536 58,809 43,210 82,634 12,598 23,348 20,851 18,709 24,423 13,473 4,247 6,370 2,923 1,500 6,079 5,699 2,923 1,350 6,568 4,190 Rupees in`000 175 210 400 638 252 192 December 1,030,911 31, 2008 174,628 175,502 161,158 161,010 339,253 21,676 16,019 19,730 16,636 33,724 15,760 18,739 21,676 57,661 41,353 23,769 22,346 13,410 43,318 20,889 12,531 5,663 5,435 5,657 2,187 1,300 9,693 6,094 3,670 2,187 8,246 1,350 9,879 1,015 5,510 1,833 (874) 228 186 175 457 249 69 97 Annual Report 2009 98 Annual Report 2009 33. 2 ST 32. 1 C 31. 30.1 0 B 30. T T T eligible forsuch benefitsafter3years ofservice. members tolumpsumpayment atthetimeofretirement,resignationordeath.Permanent staffare T Gener Tempor Permanent T assessment year 2002-2003. T 177 oftheOrdinance. T relev Balances withotherbanks Cash andbalanceswithtreasurybanks above. for issueofshares. T of incomefortaxyears 2006, 2007,2008and2009onduedates. Under Section114oftheIncomeT in thesefinancialstatementsduetotaxablelossduringtheyear. The numericalreconciliationbetweenaverage taxrate andtheapplicabletaxrate hasnotbeenpresented completed underthepro Ordinance, 2001. under theselfassessmentscheme andaredeemedtobefinalisedundersection120oftheIncome W Loss forthey Basic losspershare DEFINED BENEFITPLAN otal staffstrength he returnofincomefiledby theBankfortaxyear 2008hasbeenselectedfortaxauditundersection he presentvalue ofobligationunderthescheme atthebalancesheetdatewereasfollo he presentvalue ofobligationunderthescheme atthebalancesheetdatewereasfollo here isnodilutioneffectonthebasiclosspershareasGrouphasoutstandingcommitments he Grouphasagratuity scheme foritsemplo he numberofemplo he incometaxassessmentsofthesubsidiarycompany ha ASIC AND DILUTEDLOSSPERSHARE ASH AND CASH EQUIV eighted a AFF STRENGTH ant accountingy al description ary /oncontractual basis ver ear age numberofordinaryshares Accordingly ears. y ees co visions oftheprevailing incometaxlaw asapplicableinPakistan duringthe ALENTS T he incometaxassessmentsfortheyears 2003to2009ha v , dilutedlosspershareisequaltothebasicasreported ered underthefollowing definedbenefitscheme are833(2008:349) ax Ordinance,2001(theOrdinance),theBankhasfiledreturns Note 01Rupee 30.1 y ees (membersofthescheme). Rupeesin'000 Number v e beenfinaliseduptoandincludingthe T 527,967,898 he saidreturnsweredeemed December December December 31, 2009 31, 2009 31, 2009 6,277,328 2,059,808 4,217,520 (472,714) ------Number 1,066 1,474 Rupees in`000 Rupees in`000 (0.90) T he scheme entitlesthe 408 421,895,427 ws: ws: December December December v 31, 2008 31, 2008 31, 2008 4,383,058 2,207,640 2,175,418 e beenfiled (47,883) 1,188 (0.11) 786 402 Tax

Experience adjustment onplanliabilities Deficit Fair value ofplanassets Present value ofdefinedbenefitobligation As atDecember31 Historical information: Valuation discountrate Expected rate ofincreaseinsalarylevel Principal actuarialassumptionsusedareasfollows: Unrecognised actuarialgains/(losses)attheendof year Actuarial lossesrecognised Subtotal Actuarial lossonobligation Unrecognised actuariallossesatthebeginningof year Unrecognised actuariallosses Actuarial losstoberecognised Average expectedremainingworking livesinyears Which works outto 10% ofplanassets 10% ofobligations The limitsofthecorridoratbeginningyear Corridor limit Actuarial losstoberecognised Closing balance Actuarial gain Benefit paid Finance cost Current servicecost Opening balance Movement inthepresentvalue ofdefinedbenefitobligation: Closing balance Benefits paid Expense fortheyear Opening balance Movement intheliabilityrecognisedbalancesheet: Actuarial lossrecognised Excess Unrecognised actuariallossesasatthebeginningofyear Present value ofdefinedbenefitobligation Liability recognisedinthebalancesheet Net actuarialgains/(losses)notrecognised F Current servicecost Amounts charged toprofit andlossaccount: inance cost ------(Rupees in'000) ------34,755 34,755 (2,928) 2009 -

1,9 10,150 19,092 1,9 10,150 19,092 December 31, 2009 (2,928) 19,092 8,864 34,755 10,150 15,845 19,092 18,820 9,879 9,521 37,411 18,709 18,820 34,755 37,411 15,845 18,709 2,864 (272) 2,656 357 2,656 2,928 1,909 1,015 1,909 1,015 2,864 (272) 2,656 2008 14% 12% (272) (118) (118) (272) (357) Rupees in`000 ------15 14

1,015 19,092 December 31, 2008 (272) (629) 18,820 9,879 1,015 8,864 (629) (505) 2007 (357) (580) (580) 15% 15% - - - - - 99 Annual Report 2009 100 Annual Report 2009 DEFINED CONTRIBUTIONPLAN(PROVIDENT FUND) 34. 6 F 36. 35.2 37. 5 COMPENSA 35. 35.1 The Groupoperates acontributoryprovident fundscheme for permanent emplo Medical Utilities Rent andhousemaintenance price exceptforunquotedin and reliabledataregardingmarketrates forsimilarinstruments. calculated withsufficientreliabilityduetoabsenceofcurrentandacti F T maintained carsinaccordancewiththeGroupsservicerules. Salary inlieuofprovident fund Charge fordefinedbenefitplan contribution by emplo emplo Contribution todefinedcontributionplan T Number ofP T consolidated financialstatements. hav Executiv emn euno e se RA % .% 9% (3.2)% (9)% 0.2% Segment cost of funds(%) Segment return onnetasset(ROA) (%) (61,418) Segment liabilities Segment provision required Segment non-performingfinancings Segment assets(gross) Net income/(loss) T T nature orinthecaseofcustomerfinancinganddeposits arefrequentlyrepriced. significantly differentfromtheircarryingvalues sinceassetsandliabilitiesareeithershort-term inthe In theopinionofmanagement,fairvalue oftheremainingfinancialassetsandliabilities arenot T 2009 Bonus Managerial remuner Rs. 13.410million)eac In additiontotheabo Fees SEGMENT DETAILS WITH RESPECT AIR otal expenses otal income air value offixed-termfinancing,otherassets,liabilitiesanddepositscannotbe he fairvalue ofthein he repricingandmaturityprofileeffecti he segmentanalysiswithrespecttobusinessactivity isasfollo he Group'sPresident/ChiefExecuti e beencalculatedinaccordancewiththeGroup'saccountingpolicy asstatedinnote5.5tothe V y ALUE OFFINANCIAL INSTRUMENTS ee bothcontribute10%ofthebasicsalariestofundedscheme every month.Equalmonthly e asbonus. TION OFDIRECTORS AND EXECUTIVES ersons ation v v estments otherthanthoseclassifiedasheldtomaturityisbasedonquotedmarket h. y e, anamountofRsnil(2008:Rs.8million)was paidtothePresident/Chief er andemplo v estment w T v O BUSINESS e andcertainExecuti y hic ees duringtheyear amounted toRs.20.851million(2008: 68063 ,8,1 14,001,433 3,586,512 16,890,683 14512 4507 11385 (3,014,034) (1,163,805) (445,087) (1,405,142) Tr ,4,7 2447 872,131 224,417 1,444,772 13,800 h iscarriedatcost. dn Retail ading & 9,781 Sales 0920 0920 092008 2009 2008 2009 2008 2009 02% 10.24% 10.24% 2,1)(493 1476 (271,127) (164,726) (84,983) (21,418) President /Chief v 39,630 978 978 270 978 815 e rates arestatedinnote40.4.2and40.4.3. ------Rupees in'000------,0 61556 23,329,452 6,135,566 7,106 ------Rupeesin'000 ------1 xctv ietr Executives Directors Executive A 12,449 CTIVITIES 8,785 878 878 270 878 760 - 1 2060 2164 (472,714) (291,674) (220,670) 1915 6940 (850,083) (609,480) (179,185) v Banking es areprovided withfreeuseofGroup's T he provisions forimpairmentoffinancing 1,350 1,350 ws: ------4 v e marketforassetsandliabilities 1350 1,350 omrilTotal Commercial 10.24% Banking y 4 ees. 173,594 108,040 T 10,103 10,221 28,783 he emplo 9,778 6,669 - - - - 108 29,472,124 34,478,628 2,541,320 151,770 25,770 92,432 y 2,500 6,595 9,243 9,243 5,987 er and - 98 8 RELA 38. Withdraw Deposit duringthey At theBeginningofy Deposits: ASSOCIATES follows: At theendofy including ChiefExecuti Tr their closefamilymembersandstaffretirementfunds. management personnel,companieswhere directorsoftheGroupalsoholddirectorship,and T Modar Return ondepositsexpensed Tr Segment costoffunds(%) Segment returnonnetasset(ROA) (%) Segment liabilities Segment provision required Segment nonperformingfinancings Segment assets(gross) Net income/(loss) T T 2008 Priv Repaid duringthey Disbursed duringthey At theBeginningofy Financings: KEY MAN At theBeginningofy Deposits: At theendofy Withdraw Deposit duringthey At theendofy Return ondepositsexpensed Profit earnedonfinancing Tr Contribution toEmplo Contribution toEmplo Employ Disposal ofvehicle (refernote13.4) otal expenses otal income he relatedpartiesoftheGroupcomprisegroupcompanies,principalshareholders,key ansactions withrelatedpartiesotherthanremuneration andbenefitstokeymanagementpersonnel ansactions, incomeandexpenses: ansactions, incomeandexpenses: ate placementsof TED P aba Managementfee ee BenefitPlans: al duringthey al duringthey A AR GEMENT PERSONNEL TY ear ear ear TRANSACTIONS ear ear ear ear ear ear TFCs y y ear ees Provident Fund ees Gratuity Fund v ear ear e Officerunderthetermsofemployment asdisclosedinnote35are 10014 ,7,8 5,616,252 2,470,284 11,080,124 Cmeca Total Commercial Retail Trading & ,3,7 21838 4,321,212 2,178,318 7,331,072 9738 2824 5073 (1,716,275) (580,733) (208,224) (115,942) (927,318) Sales 811,376 12.41% (3.1%) ------Rupees in'000------1241 6,2)(186,093) (63,622) (122,471) 253,170 24% 12.41% 12.41% 8,7)(247 (141,687) (52,417) (89,270) Banking 496 23,113 44,946 54 1.8% 15.4% December 31, 2009 (326,931) 364,904 603,845 (10,075) (49,118) 35,386 73,359 15,000 43,871 48,796 49,526 20,851 18,709 Banking 3,114 2,002 1,018 Rupees in`000 323 731 126 - - 13,830,602 19,166,660 December 1,668,391 31, 2008 (494,747) 493,484 (47,883) (15,460) 36,649 35,386 19,101 40,230 43,871 13,410 (6,812) 4,949 6,930 9,879 1,509 205 323 - - - 9 101 Annual Report 2009 102 Annual Report 2009 in 9 CAPITAL STRUCTURE 39. T Shareholders Capital T Regulatory CapitalBase are asfollo T T commer exc Accumulated losses Less: Bookvalue ofgoodwill andintangibles Less: Deficitonaccountofrevaluation of T T reserv Eligible T Rev Gener T inv T deduction forin unappropriated profits,etcafterdeductionsfordeficitonrevaluation ofa Tier 1capital,w Tier 1capital Group's regulatorycapitalisanalyzedintothreetiers ier 2capital,w ier 3capitalhasalsobeenprescribedby SBP. Ho he riskweightedassetstocapitalratio, calculatedinaccordancewiththeStateBank'sguidelinesoncapitaladequac otal otal RegulatoryCapital ier ICapital ier 3capital ier 2capital ier IICapital estments inentitiesengagedbankingandfinancialacti hange translation reserves, etcafter50%deductionforin aluation Reserve (upto45%) es onrevaluation offixedassetsandequityin T al provisions subjectto1.25%oftotalriskweightedassets ier IICapital v cial entitiesandsignificantminorityin T estments heldin AFS category ier IIICapital ws: hic v hic estments intheequityofsubsidiarycompaniesbeingcommercial entitiesandsignificantminority h includesgeneral provisions forloanlosses(uptoamaximumof1.25%riskweightedassets), h includesfullypaidupcapitalandgener v estments inentitiesengagedbankingandfinancialacti wev v estments uptoamaximumof45%thebalance,foreign er theGroupisnoteligiblefor v vities. estments intheequityofsubsidiarycompaniesbeing al reserv es asperthefinancialstatementsandnet (a) v ailable forsalein 5,279,679 4,568,181 5,178,315 4,705,601 5,086,875 4,528,785 December 31, 2009 (574,078) (164,379) (12,437) 39,396 18,242 20,615 18,781 T Rupees in`000 ier 3capital. - v estments and50% December 5,279,679 5,105,117 31, 2008 (101,364) (78,605) (12,835) 18,242 vities. - - y Capital Adequacy 39.1 subjecttoStandardized approach (Simple) P Credit Risk belo The capitalrequirementsfortheGroupaspermajorriskcategoriesisindicatedinmannergi Market Risk exposure-nonmarketrelated P Oper oper Capital T T Capital otal eligibleregulatorycapital held otal Risk ortfolios subjecttostandardized ortfolios subjecttooffbalancesheet w: Investment Claims onBanks Retail P Corpor P Mortgage P Others F Equity Risk Interest RateRisk F Capital Requirementforportfolios Corpor TOTAL Oper Capital Requirementfor ational Risk oreign Exchange Risk ast duefinancings ixed Adequac Adequac ational Risk W Assets ational risks ate P ate P ortfolio eighted Assets ortfolio ortfolio ortfolio y Ratio(a)/(b) y Ratio Approach 1,582,061 2,189,182 241,067 899,125 227,037 453,556 466,744 ------Rupeesin'000 ------Rupeesin'000 55,207 35,008 24,656 99,961 12,429 52,427 87,951 Capital Requirements aia eurmns Risk Capital Requirements 0920 092008 2009 2008 2009 0920 092008 2009 2008 2009 - 759 1,029,136 1,110,329 167,072 106,270 442,911 170,084 27,111 25,546 86,417 32,955 46,559 3,725 1,679 1,679 - - (b) (a) 15,820,605 21,891,823 21,891,823 2,410,668 8,991,248 2,270,368 4,535,563 4,667,437 4,568,181 December 31, 2009 552,073 350,083 246,559 999,606 124,287 524,270 879,511 20.87% 7,587 Risk - Rupees in`000 W W eighted eighted 11,434,848 12,336,994 12,336,994 1,856,351 1,180,775 4,921,234 1,889,823 5,105,117 December 31, 2008 301,237 283,847 960,190 366,167 517,320 41.38% 41,391 18,659 18,659 Assets Assets - - ven 103 Annual Report 2009 104 Annual Report 2009 Capital Management 39.2 40. At strategic level, theriskrelatedfunctionsareappro Strategic Level - - - RISK MAN with regulatoryandbanksown internalpoliciesha requirement inthisrespect,andconductsitsbusinessaccordingly. Risk-exposurelimitsincompliance effectiv Management F needs tobereinforced throughastrongcontrolculturethatpromotessound riskgo A wellformulatedpolicy andprocedureiscriticalforaneffecti It encompasses riskmanagementwithin abusinessareaoracross businesslines.Generally therisk Macro Level remains withinacceptable level and thereward compensates' fortherisktaken. policies formanagingrisks andestablishingadequatesystemscontrolstoensure thato include; definingrisks,setting parameters, ascertaining institutionsriskappetite,formulatingstrategy and In addition,theGroupwas alsorequiredtomaintainaminimumCapital Requirement withinthestipulatedtime. merger/acquisition into/by theBank. Memor has already madeanannouncementtoKar including butnotlimitedtoissueofrightsharesandacquisitionoptions.Inthisconnection,theBank Directors, inordertocomplywiththeenhancedcapitalrequirement,isconsideringvarious options T integr Requirement by theSBP, videitsletterBSD/BAI-3/608/191/2010 datedMar b paid upcapital(freeoflosses)forBanks/Development Finance Institutionstoberaised toRs.10billion T Our objectivesforasoundcapitalmanagementare:1)toensurethattheGroupcomplieswith is atthefurthestfromequator. Moreandmoresignificanceisbeingattached toaneffecti from thecenteronroleofriskmanagementinglobalcrisisrecentpast,division no of theriskweightedexposureGroup. important areasofthebankingbusiness,andco acti Risk Managementistheprocessofmanaginguncertaintiesthatarisesinnormalcoursebusiness its riskweightedexposures. However T billion paidupcapital(freeoflosses)by theendoffinancialyear 2009. Planning Horizonandbeabletotakead capital ratios tosupportbusinessandmaximizeshareholdervalue and4)tooperate withaRevolving regulatory MinimumCapitalRequirement(MCR)2) effectiv During thelastcoupleofyears riskmanagementhasweatheredalotofcriticismwithrelationstoits whic including Credit,Market,Liquidity, Operational etc. RISK MAN he StateBankofPakistan throughitsBSDCircular No.07dated April 15,2009requirestheminimum he paidupcapitaloftheBank(freelosses)asDecember31,2009amountstoRs4.706billion. he GroupisalsocommittedtothefullandatimelyimplementationofBaselII(B2)w y theyear endingDecember 31,2013. risk analysisability Ev communication withintheBank. Critical DecisionMakingshouldbebasedonrelevant resear T vities. Italsoencapsulesrisk/reward trade-off. o beeffecti h commensurate's wellwithourcurrentsizeandstructure. ery lossornearmissevent shouldprovide someKLO(Key LearningOutcome),developing abetter ated riskmanagement. eness intheglobalfinancialmarkets. While financialmanagersatthetimewereclearlydi ely provide forarisk-basedcapitalapproach. Currently, theBankadherestoregulatory andum ofUnderstanding(MoU)withanotherIslamicCommercial Bankinrelationtoits , theBankhasbeengranted anexemptiontillMar A AGEMENT GEMENT FRAMEW ramew v e, strongmonitoringandcontrolactivities shouldbeintegral totheBank. ork hasbeendeveloped keepinginmind,that: . ORK T he BoardisconfidentthatitwillmeettheMinimumCapital T v he raise istobeac antage ofnewin T ac he GroupCAR asatDecember31,2009was 20.87%of v ers awidespectrumoffinancialbusinessriskcategories; hi Stock Exchange aboutitsdecisiontoenterintoa T v he functionofriskmanagementisonethemost maintainastrongcreditr ed by theseniormanagementandBoard. T he Groupfollows aneffecti v e alsobeendefinedforeach assetclass. c v hiev h 31,2010tomeettheMinimumCapital estment opportunitieswhen theyappear v e riskmanagementfr ed inaphasedmannerrequiringRs.6 c h, properanalysisandeffecti Adequac c ating 3)maintainhealth h 3,2010. y Ratio(CAR) of10% v v ernance. OurRisk e riskgo amew T he Boardof hic ork; itthan ver vernance h w v all risk e and These vided ould ve w y . 40.1.1 40.1 thebusinesslineacquisition, strongadherencetothecreditandotherrelatedcriteria. and accountability, anddevelopment ofcontrolfr articulation oftheGroup'sriskmandate,establishmentastructurethatprovides forauthority, delegation A strongorganizationalset-up,withclearlydefinedrolesandresponsibilitiespermitsahigherlevel of RISK ORGANIZA being thehealthofportfolios. Micro Lev resilience oftheportfolio. category. Periodical sensitivity /scenarioanalysis,stresstestingisperformed,toreviewsensitivity and management activities performed by middlemanagementorunitsdevoted torisk reviewsfallintothis understanding, canbeofmaximumbenefittotheorganization.Microlev Risk managementatmicrolev to keeprisksaminimum throughbroaddi policies andprocedures,withanexplicitaimtomitigate/manageriskinlinetheGroupsobjecti Liability Committee)andMCC(ManagementCreditmanageadheretotheriskmanagement T parties. in ordertobeeffecti financings, deposits andcontingencies commitments. Segmental information ispresentedinrespect oftheclassbusiness andgeographical distributionof should asarulebesecured andselfliquidating. T sector counterparties(socialunrest,civil war etc.) and /ortheriskthatcountry'sspecificeconomicpolitical factorsprecipitatethedefaultofpri country issueslegislationtoprohibitfreetransfer rightsoffundsincluding foreignexchange restrictions / ortheriskthatcross-bordertransfer offundscouldberestrictedor completely blocked, i.e.that a T iv) the Grouphasalready metitscommitments. T iii) T Counter ii) party atapricelower thantheoriginalcontract price. T i) T Credit riskarisesduetotheofaborrower defaultingonhiscommitmenteitherinpartorasaw T resour T RISK APPETITE OF THE GROUP to spreadtheGroup'scredit andtrade financing activities o Segmental information Credit Risk tow he RiskmanagementFunctionattheGroup,alongwithdifferentcommitteesincluding ALCO (Asset his approach isprimarilybased onaviableportfoliobuild-upwithlong-termview;keyconsider here isariskthattheassetrepossessedduetodefaultoflesseemay besoldorleasedouttoanother he riskthatacountryinitsfunctionascontracting partnerdefaultsduring thetermofatransaction and he Groupplacesastrongemphasis onlong-termstabilitybeforehighreturns.Itis the Group'sstr he riskthatthecounter-party doesnotmeetitscommitmentsatthematurityoftransaction after he riskthatthecounter-party defaultsduringthetermofatransaction (Murabaha, Ijarah etc.). he termCreditRiskhascertainsub-categoriesasfollo he riskappetiteoftheGroupisanoutcomeitscorporate goal,economicprofitability, a ards itsbusinessobjecti Country risk Settlement risk Price risk ces andmostsignificantly, itscontrols. el -party risk TION v e, ithastoberunonanenterpriselevel. Riskgo v es. Ittakesaholisticviewofitsin el, isofcriticalimportance. v ersification intermsofgeogr T he Groupbelieves inacautiousyet steady approac amew ws: ork. Riskmanagementcannotli T his functionifperformedwithdiligenceand v er awiderange ofcustomers.F v estment andfinancingneeds. v ernance mustin el riskmanagementincludes aph y andproductmix volv v e inav e allrelev inancing vailable acuum; ategy hole. ation vate ves. ant h 105 Annual Report 2009 106 Annual Report 2009 Segments by classofbusiness 40.1.1.1 Transport, storage andcommunication Exports /imports Footwear andleathergarments 109226 15705 9033.9% * OthersincludeSoleProprietors,trusts,fundaccounts,governmentaccountsetc. 69,063 0.5% Others* Individuals Services 61,537 Insurance Financial Transport, storage andcommunication Exports /imports 2.6% Wholesale andretailtrade Power (electricity),gas,water,sanitary 170,952 Construction Production andtransmission ofenergy Electronics andelectricalappliances Education Automobile andtransportation equipment Footwear andleathergarments Sugar Cement Chemical andpharmaceuticals Textile Agriculture, forestry, huntingandfishing 7.7% * OthersincludeSoleProprietors,trusts,fundaccounts,governmentaccountsetc. 110,846 Others* 0.7% Individuals Services Insurance 197,062 Financial 1.4% Wholesale andretailtrade Power (electricity),gas,water,sanitary 187,978 Construction Production andtransmission ofenergy Electronics andelectricalappliances Education Automobile andtransportation equipment Sugar 1,393,750 Cement Chemical andpharmaceuticals Textile Mining andQuarrying Agriculture, forestry, huntingandfishing 35181100 79161100 ,3,8 100% 1,439,984 100.0% 27,911,651 100.0% 13,531,861 10 2425810 ,5,1 100% 1,751,914 100% 12,412,598 100% 6,687,460 - - 32.7% 4,060,087 22.2% 1,481,866 25.7% 450,434 0.7% 91,885 24.6% 1,644,862 45.0% 648,128 42.9% 11,974,438 13.6% 1,782,030 ,2,2 27 9,7 .%3,8 2.2% 32,083 29.4% 1.4% 8,199,113 11.9% 398,476 1,605,761 12.7% 1,724,828 12.4% 179,210 1.6% 454,334 13.6% 1,835,647 Financings Financings 8,7 .%152308 3143.6% 35.6% 0.4% 63,144 623,274 7,735 51.7% 0.8% 0.1% 0.1% 6,415,609 105,243 1,735 2.5% 12.6% 10,155 7.2% 43,142 3.0% 839,549 1.9% 4.3% 3.8% 484,577 4.2% 369,359 32,682 284,221 - 2.3% 476,776 285,189 0.3% 3.8% 154,706 - 34,663 256,589 3.0% 3.7% 5.6% 376,399 247,957 372,986 3.7% 250,000 6,0 .%970533 7216.8% 97,221 0.6% 3.3% 8,000 4.3% 917,035 0.5% 3.0% 1.2% 62,767 6.5% 3.5% 149,459 42,704 0.6% 16,753 2.7% 0.4% 469,805 1,817,606 6.8% 0.3% 8,946 2.1% 744,283 0.4% 2.1% 123,813 926,070 30,000 0.2% 82,041 6,027 1.4% 0.4% 290,287 0.2% 5.5% 66,145 1.1% 2.1% 192,490 114,415 747,088 44,316 150,014 0.8% 598,799 2.9% 5.6% 114,322 6.4% 396,967 761,592 866,027 Rupees Rupees in '000 in '000 54704 70301 3570.8% 13,507 0.1% - 17,053 - 0.4% 14% 1.7% 6.4% 1.0% 25,427 245,000 218,276 112,898 0.1% 69,353 0.3% 0.2 % 12,545 42,236 15,702 0.3 % 1.1% 23,250 73,663 63206 6,0 .%172913.7% 197,299 0.6% 160,501 0.6% 76,372 390- 3,930 0.2% - 4,092 1,235 0.2% 23,897 0.1% 5,376 ,1 .1 0420.3% 70,482 0.01% 1,315 0.6% 159,646 0.1% 9,518 - - 0.7% 92,495 - - 1210.1% 21,221 - - 1.2% 345,598 - - (Gross) (Gross) Percent Percent 10 % December 31,2009 December 31,2008 1,272,868 Rupees Rupees in '000 in '000 -8,0 4.9% 85,208 - - - - 5 - 453 Deposits Deposits Percent Percent 4.6% Rupees Rupees in '000 in '000 Contingencies and Contingencies and Commitments Commitments ------Percent Percent - 40.1.3Details ofnon-performingfinancingsandspecificprovisions by classofbusinesssegment Segments by sector 40.1.1.2 40.1.4Details ofnon-performingfinancingsandspecificprovisions by sector Textile * Wholesale andretailtrade Private Public /Government Private Public /Government Chemical andpharmaceuticals Power (electricity),gas,water,sanitary Automobile andTransportation equipment Cement Import/Export Paper product* Transport, Storage andCommunication Services Construction Others* Individuals* Public /Government *Provision hasbeenmadeundersubjectiveevaluation. Private 291819%2,6,9 6 ,7,0 87% 100% 1,273,808 1,439,984 96% 100% 27,911,651 26,661,596 100% 96% 13,531,861 12,931,861 ,8,6 0%1,8,1 1 ,8,4 96% 100% 1,751,914 1,687,445 100% 91% 12,412,598 11,288,814 100% 100% 6,687,460 6,687,460 0,0 %1,250,055 4% 600,000 Rupees Rupees in '000 in '000 iacnsPoiin iacnsProvisions Financings Provisions Financings Financings Financings lsiidSeii lsiidSpecific Classified Specific Classified eebr3,20 December31,2008 December 31,2009 5,9 102,473 155,997 - 100,000 2,5 32,486 123,058 8,6 230,928 37,865 38,941 788,665 177,359 120,667 8,6 230,928 230,928 788,665 788,665 eebr3,20 December31,2008 December 31,2009 ------Rupeesin'000------Rupeesin'000------,2,8 %6,6 4% 64,469 9% 1,123,784 - - 3785,483 63,758 37012,422 23,750 1301,108 21,360 - 2,117 - - - - - 9 150 599 - - Percent Percent Held Rupees Rupees in '000 in '000 December 31,2008 December 31,2009 Deposits Deposits Percent Percent 4% 8,9 141,687 186,093 8,9 141,687 141,687 186,093 186,093 2293,199 12,289 32023,250 23,250 01118,775 30,101 99069,980 69,980 6938,599 16,913 ,8 3,341 6,683 ,3 2,432 2,432 ,0 1,250 5,000 ,4 2,485 9,940 ,0 8,202 8,809 9 174 696 - - - Rupees Rupees in '000 in '000 6,7 13% 166,176 Contingencies and Contingencies and Commitments Commitments Held Percent Percent - - - 107 Annual Report 2009 108 Annual Report 2009 Credit Risk:StandardizedApproach 40.1.6.1 Credit Risk:StandardizedApproach 40.1.6 015Geographicalsegmentanalysis 40.1.5 CRM =CreditRisk Mitigation Total Retail Corporate Exposures Banks’ Corporate Exposures compatible totherating guidelinesofSBP, whichwillsupportusininternallyrating ourcreditclients. exposures, where available.TheGrouphasalsorecentlyemployedcreditrating model,whichis The GroupusesreputableandSBPapprovedrating agenciesforderiving riskweighttospecificcredit weights intheIRBApproach Credit Risk:DisclosuresforportfoliosubjecttotheStandardizedApproach&supervisoryrisk towards theFIRBandAdvanced approach. CRM (CreditRiskMitigation)technique where applicable.TheGroupcarriesastrongdesiretomove whole. TheGrouphascurrentlyemployedstandardizedapproach forevaluation ofcreditrisk.Ituses Credit riskarisesduetotheofaborrower defaultingonhiscommitmentetherinpartorasa Pakistan Pakistan Unrated Category 150% 100% Rating 75% 50% 20% 50% 20% 0% 0% ------Rs.In'000------CRM Outstanding 2445132321,6,6 ,3,4 7,8 5,357,561 379,288 5,736,849 12,062,169 382,372 12,444,541 December 31,2009 ,5,9 1,9 ,4,9 ,0,7 1,1 4,885,957 215,014 5,100,971 7,745,395 210,097 7,955,492 37,645 - 37,645 3,343,580 - 3,343,580 DdcinNet Deduction Amount Net amount Deduction Amount - - - 248,256 - 248,256 0,2 7,7 2,4 4,3 164,274 542,737 55,496 328,746 - 172,275 55,496 501,021 382,879 - 382,879 - - - 13,313 - 13,313 Contingencies Netassets Total assets Loss before Netassets Total assets Loss before ------Rupeesin'000------Rupeesin'000------5551 42751475371,439,984 4,735,377 34,207,501 (555,561) 2251 90104510401,751,914 5,180,420 19,011,024 (222,511) e mlydand employed employed taxation taxation Credit ExposuressubjecttoStandardisedapproach emplo I AR Others PACRA JCR -VIS December 31,2008 December 31,2009 Types ofExposuresandECAI's used à à y depoe and employed ed amount CRM Outstanding December 31,2008 2009 à à Contingencies Commitments Commitments 378,463 N/A N/A 40.4 03Y 40.3 40.1.6.2 40.2 Market riskencompassestheoflossesduetoad Market Risk SECP andtherequirementsofappro of theGroupby applyingupward anddo balance sheetpositionsby conductingduration gapanalysis.Italsoassessesyieldrate riskonearnings T shall berepricedaspertheirrespecti data. Itincludescurrentbalancesandcontractual yieldrates; theGroupunderstandsthat its financing It includesallmaterialyieldriskpositionsoftheGrouptakenintoaccountrepricingandmaturity v Pro Moreover place beforeitentersintofinancial marketsfortr an T carrying afixedrate, foreignexchange rates, securities,preciousmetalsorothercommodities. T Inv • Str • Equity positionincludesthefollo Equity Position RiskintheBankingbook-BaselIISpecific be very minimal. of maturityunless such risksha alue andcharged toprofitandlossaccount. he strategy oftheGroupistokeepmarketrisks totheminimuminthatGroupdoesnotenterinto he Groupestimateschanges intheeconomicvalue ofequityduetochange intheyieldrates onon- hese equityin ield /ProfitRateRiskintheBankingbook-BaselIISpecific con V collater standardized approac simple approach forCredit RiskMitigation(CRM).Off-balancesheetitemsunderthesimplified Group obtainscapitalreliefforbothonandoff-balancesheetnon-marketrelatedexposuresby using Basel IISpecific. Credit RiskDisclosureswithrespecttoMitigationforStandardandIRBApproaches- During they Rs. 1,237.802million. av million issubjecttotheCRMofRs.38.842million.HencetotalbenefitRsw Under off-balancesheet,non-marketrelatedexposures;thecorporate portfolioofRs1,237.802 through CRMagainsttotalon-balancesheetexposureofRs.12,444.541million. million issubjecttoCRMofRs.172.275million. million issubjecttotheCRMofRs.210.097whereas aclaimonretailportfolioofRs.501.020 standardized approach for on-balancesheetexposures,thecorporate portfolioofRs.11,943.520 T in themarketconditions. they generally donotposerisktotheGroupintermsofchange intheirvaluation duetoc laid down by SBP. Sinceeligiblecollaterals forCRMpurposesareallintheformofcashcollater due tothechanges intheexposureamountsandresultantamountofcashcollateral obtained. against amountofRs567.698millioninyear 2008. y speculati he GrouptakesthebenefitofCRMagainstitsclaimsoncorporate andretailportfolio.Underthe aluation andmanagementofeligiblecollaterals forCRMisbeingdoneinlinewiththeconditions vision fordiminutioninthevalue ofsecuritiesismadeafterconsideringimpairment,ifany intheir ailed by theGroupthroughCRMagainsttotaloff-balancesheet,non-marketrelatedexposureof ategic in v estment inequitiesforgenerating revenue inshort-term. ersion factors.Underthestandardizedapproach theGrouphastakenad als a , sincetheGroupdoesnotdeal ininterestbasedproducts,theimpactofabo v vestments v ear e transaction. Ingeneral theGroupensuresthatanadequatehedging mechanism isin ailable withtheGroupinformofsecuritydepositsandcashmargins. v estments areaccountedforanddisclosedaspertheprovisions anddirecti , totalamountofcashcollateral usedforCRMpurposeswas Rs.421.214millionas T he Groupdoesnotha h arecon v e beentakencare ofthroughsomeother mec wing: v erted intocreditexposureequi v v ed International Accounting StandardsasapplicableinP e contr v e positionsorforward exchange contracts giving mismatc wnw acts. ard shoc ading. T he totalbenefitofRs.382.372millionwas a T ks. v he differenceinthevalue ofcashcollateral is erse mo v ements inmarketsforinstruments v alents throughtheuseofcredit hanism. v antage ofthecash v v e riskswill es ofSBP akistan. hanges vailed als, hes as , 109 Annual Report 2009 110 Annual Report 2009 041ForeignExchange Risk 40.4.1 T Equity Position Risk Saudi Riy ACU U.A.E Dirham Euro J Great BritainP United StatesDollar P Saudi Riy CHF ACU U.A.E Dirham Euro J Great BritainP United StatesDollar P open positionismanagedwithinthestatutorylimitsasfixedby theStateBankofP manages itsforeignexchange exposureby matching foreigncurrency assetsandliabilities. deposits, foreigncurrency placementswithStateBankofPakistan andotherbanksetc. of forward promises,foreign currency cashinhand,balances withbanksabroad,foreigncurrenc consequent tothec Foreign exchange orcurrency riskarisesfromthefluctuation inthevalue offinancialinstruments apanese apanese akistan Rupee akistan Rupee he Grouphadnosignificantopenexposuretoequities asofyear end2009. Yen Yen al al ound ound hanges inforeignexc hange rates. ------Rupeesin'000------Rupeesin'000------9010413,830,604 19,011,024 873791,1,1 360 5,161,762 (3,670) 13,618,318 18,783,749 4275129,472,124 34,207,501 3471228,894,793 33,497,132 7,9 6,7 ,7 8,681 3,670 169,779 174,790 2,0 0,7 879 111,977 (8,749) 408,379 529,105 41532,858 34,105 2659,650 12,635 96678,238 79,676 14390,714 91,463 sesLaiiisOf Net Off- Liabilities Assets sesLaiiisOf Net Off- Liabilities Assets 2,108 2,545 2,695 5,923 493 599 538 475 494 T he Group'sforeignexchange exposurecomprises December 31,2008 December 31,2009 ------aac foreign balance aac foreign balance 8,749 tm exposure items tm exposure items he currency sheet he currency sheet ------akistan. 5,180,420 4,735,377 4,611,088 T he Group T 2,108 2,545 1,247 2,985 2,695 5,923 1,438 he net 493 599 538 475 494 749 y 05 LiquidityRisk 40.5

042MismatchofProfit/YieldRateSensiti 40.4.2 time andatlow prices. withdraw withdraw Liquidity riskisdefinedas inability toraise deposits atacompetiti Cumulativ Sensitivity Gap T On-balance sheetgap Other liabilities subjecttofinancelease Liabilities againstassets Sub-ordinated loans accounts Deposits andother institutions Due tofinancial Bills pa Liabilities Other assets Financings Investments institutions Due fromfinancial Other Banks Balances with Cash andbalanceswith Assets instruments On-balance sheetfinancial treasuryBanks Cumulativ Sensitivity Gap T Other liabilities On-balance sheetgap subjecttofinancelease Liabilities againstassets Sub-ordinated loans accounts Deposits andother institutions Due tofinancial Financings Investments Bills pa Liabilities Other assets institutions Due fromfinancial OtherBanks Balances with treasuryBanks Cash andbalanceswith Assets instruments On-balance sheetfinancial otal otal Y Y ield /ProfitRisk ield /ProfitRisk yable yable e e Y Y ield/Profit RiskSensitivity Gap ield/Profit RiskSensitivity Gap al ofimportantcustomerdeposits (includinginterbankdeposits). A suddensurgeinliability als may lea Profit r Profit r Effectiv Effecti 50%6,527,531 15.06% 54%4,861,883 15.48% 67%40,351 16.75% 40%13,282,152 6,653,447 14.00% 13.33% 21%4,018,813 12.14% .8 12,412,598 245,939 7.28% 6.50% 35 2,207,640 13.5% .4 27,911,651 156,160 6.74% 6.50% .3 2,059,808 9.43% yield / yield / 236,905 - - - 353,646 - 343,976 - 2,175,418 - 225,093 - - 485,608 - 547,457 - - 4,217,520 - v ate ate e e v e theGroupinapositionof having toliquidateassetsinavery shortperiodof 13,249,088 16,156,799 28,778,512 30,779,197 ,0,1 3210 (123,639) (382,130) 2,907,711 ,0,8 21351 (770,460) (2,163,501) 2,000,685 Total Total ------21351 29391 20894 0,6 ,5,8 5,412,798 1,352,785 706,062 (2,068,944) (2,933,961) (2,163,501) 21351 (770,460) (2,163,501) ,2,4 9067 5,3 11573 4,8 355,522 240,384 1,155,743 757,033 950,687 3,421,249 ,3,1 8708 ,0,8 1798 0,1 883,602 802,011 157,918 1,002,384 827,048 3,039,119 ,2,2 8477 4,0 11573 4,8 355,522 240,384 1,155,743 647,802 814,707 3,420,521 ,0,9 - 2,100,092 ,5,7 13546 1,005,249 1,395,446 8,259,177 6,095,676 ,1,1 ------8,259,177 - - - 4,018,813 ,3,7 ------520,536 ------1,539,272 3210 5579 2048 12823 6666 1856 ,3,7 ,0,3 3,930,804 3,500,835 1,234,373 (168,536) (696,616) (1,258,243) (260,418) (505,769) (382,130) 3210 (123,639) (382,130) Mnh3Mnh otsto1 6Months 3Months Month mnh3mnh otsto1y 6months 3months month Upto 1 Upto 1 927,223 537,591 11,804 2 1590 0,3 ------109,231 135,980 728 - - - 236,905 ------353,646 ------343,976 ------6,0 310,000 460,000 ------2,175,418 ------225,093 ------3000 - - 310,000 ------485,608 - 547,457 ------4,217,520 ------Ov Ov 1,310,956 v er 1to er 1to 798,501 624,986 624,986 28,547 84,490 e Assets andLiabilities 1,870,266 1,560,266 Ov Ov 245,351 245,351 9,7 1798 4,1 573,602 342,011 157,918 994,474 865,017 865,017 933,579 er 3to er 3to 160 ------71,670 7,910 ------Ov Ov ,7,0 4,2 ,6,1 16408 0,1 7,1 (2,998,181) 577,016 703,110 (1,694,058) 4,060,013 646,723 2,775,006 ,7,0 4,2 ,6,1 16408 0,1 7,1 (2,998,181) 577,016 703,110 (1,694,058) 4,060,013 646,723 1,275,356 2,775,006 401,287 3,103,787 ,7,9 ,4,1 5,335,369 1,048,010 5,878,793 ,0,8 0,8 1,275,356 401,287 3,103,787 1,909,165 735,527 5,878,793 (997,825) (997,825) er 6Months er 6months Year ear - - 99,638 ------Ov Ov 2 y 2 6,2 528,080 561,627 6,2 528,080 561,627 1,8 3,426,204 312,483 er 1to er 1to Years ears Exposed to Exposed to December 31,2008 December 31,2009 Rupees in'000 Rupees in'000 Ov Ov 3 y 3 Y Y er 2to er 2to Years ield /Profitrisk ield /Profitrisk ears v e rate. Itcanbecausedby the 3,718,740 3,395,503 1,701,445 3,395,503 Ov Ov ,0,0 ,6,6 2,6 (1,023,093) 429,969 2,266,462 1,402,909 ,0,0 ,6,6 2,6 (1,023,093) 429,969 2,266,462 1,402,909 ,1,7 304,659 2,417,374 ,2,8 ,7,2 429,969 2,571,121 3,820,283 ,1,7 304,659 2,417,374 ,3,7 6,2 429,969 665,421 1,637,473 ,8,1 1,905,700 2,182,810 5 y 5 977,695 723,750 er 3to er 3to Years ears Ov Ov 10 y ,2,5 4,998,866 4,421,850 1,653,612 ,5,2 577,016 2,356,722 1,653,612 1,877,218 10 7,0 577,016 479,504 er 5to er 5to er Years Years asyears ears Abov Abov e 10 e 10 3,646,437 - 3,055,886 - 3,373 - 7,578,394 - 3,792 - 2,907,711 2,623,344 8,289,095 2,000,685 5,290,914 instruments instruments Non-profit Non-profit financial financial bearing bearing 1,609 ------939 111 Annual Report 2009 112 Annual Report 2009 Surplus/(Deficit) onrevaluation ofassets Accumulated losses Reserves Share capital/Headofficecapitalaccount Net assets Deferred taxliabilities Other liabilities financelease Liabilities againstassetssubjectto Sub-ordinated loans Due tofinancialinstitutions Bills pa Liabilities Deposits andotheraccounts Deferred taxassets Oper Other assets Financings Investments Due fromfinancialinstitutions Balances withotherbanks Cash andbalanceswithtreasurybanks Assets Surplus /(Deficit)onrevaluation ofassets Accumulated losses Reserves Share capital/Headofficecapitalaccount Net assets Other liabilities Liabilities againstassetssubjecttofinancelease Sub-ordinated loans Deferred taxliabilities Deposits andotheraccounts Due tofinancialinstitutions Bills pa Liabilities Deferred taxassets Oper Investments Other assets Financings Due fromfinancialinstitutions Maturities of Assets andLiabilities of theGroup. An Assets-Liabilities Committee(ALCO)isresponsibleformonitoringtheliquidityandmarketrisks balance sheet. T Asset-Liability Management(ALM)process(stronglydifferingmaturityprofiles). this iscausedby adiscrepancy ofthecashflows fromthetwo sidesofthebalancesheetdueto a faulty Under refinanceriskweunderstandtheofholdinglonger-term assetsrelativetoliabilities.Generally Balances withotherbanks Cash andbalanceswithtreasurybanks Assets he riskisminimizedb ating fixedassets ating fixedassets yable yable

y broaddi 38064 ,8,3 988,273 7,082,230 13,830,604 24258 ,7,0 814,707 6,476,407 12,412,598 90104 ,8,7 1,022,207 5,887,879 19,011,024 94214 66821 1,455,301 16,658,201 29,472,124 42751 14148 1,083,788 11,481,418 34,207,501 32212 3,4 625,191 537,746 13,282,152 27,911,651 5,279,679 5,180,420 5,180,420 ,8,4 2,7 41,542 20,771 1,889,543 ,3,7 5291 153,600 552,931 1,032,375 ,2,3 9725 798,518 927,225 6,527,531 ,6,8 ------4,861,883 ,0,4 21970 - 2,199,730 2,207,640 ,7,1 21548 ------2,175,418 2,175,418 4,735,377 5,279,679 4,735,377 ,7,1 3,5 61,311 30,655 2,375,515 ,5,4 2 - 21 6,653,447 ,4,2 6685 397,285 616,855 1,241,621 ,1,1 40883 ------4,018,813 4,018,813 ,5,0 20988 ------2,059,808 2,059,808 ,1,2 42750 ------4,217,520 4,217,520 (101,364) (574,078) 5,4 3366 ------353,646 353,646 4,3 78 135,980 728 245,939 7,8 ------276,283 1,0 3502 985 - 59,855 335,022 918,705 8,0 4568 ------84,490 - - 485,608 156,160 485,608 5,2 ------358,625 Total Total 818,421 031 184 857 ------28,547 11,804 40,351 29,776

2,105 v ------ersification andaminimumofconcentr 58751 1,310,956 15,837,571 (1,194,351) 51672 3153 7,6 ,0,2 ,1,8 ,4,4 19290 ,8,2 1,559,674 1,181,129 (1,902,940) 4,448,044 1,014,585 3,008,821 974,361 (371,513) (5,176,782) Mnh3Mnh otsto1 6Months 3Months Month Upto 1 Upto 1 Month 5,4 3,8 - 37,586 251,449 Ov Ov ots6Mnh to1 6Months 3 Months er 1to er 1to 33,934 ,9,9 3,7 ,5,6 ,6,0 ,7,7 ,6,1 1,004,397 2,969,217 4,078,472 1,169,107 1,051,264 737,778 1,090,693 ,0,4 ,0,9 0,8 1,275,356 401,287 3,206,195 1,005,249 ,7,1 ,1,1 ,1,7 5,723,400 1,415,872 6,215,016 1,979,610 ,6,1 ,7,9 3,2 1,909,165 735,527 5,878,794 1,561,515 Ov Ov 3,6 5680 1,8 1,8 ,6,2 ,6,5 1,004,397 2,664,558 1,260,627 813,585 810,880 (546,880) 333,660 5,3 ,8,5 4,8 5,2 ,1,4 0,5 - 304,659 2,817,845 355,522 240,384 1,284,658 757,033 109,231 4,0 ,5,4 4,8 5,2 ,1,7 0,5 - 304,659 2,417,374 355,522 240,384 1,155,743 647,802 9,0 5,0 4,1 7,0 ,3,7 6,2 429,969 665,421 1,637,473 573,602 342,011 158,706 994,606 3,7 ,0,8 0,8 1,275,356 401,287 3,103,787 933,579 310,000 23334562923292318973806294,772 398,096 198,957 249,253 249,253 374,586 62,313 584204,496 25,864 71,670 19624213782367,862 367,862 204,271 91,966 619131,951 16,129 er 3to er 3to 7910 December 31,2008 December 31,2009 Ov Ov er 6Months er 6Months 128,915 102,408 Year Year ------Rupees in'000 Rupees in'000 Ov Ov 2 2 6,0 1,0 ,8,1 ,0,0 3,373 1,905,700 2,182,810 310,000 460,000 1,8 3,426,204 312,483 er 1to er 1to Years Years - - - 2,2 - 421,420 - - - Ov Ov 3 3 ations onbothsidesofthe er 2to er 2to Years Years 62259,232 36,252 20,169 3,816,923 3,395,503 1,913,983 Ov Ov 5 5 153,306 977,695 723,750 400,471 er 3to er 3to Years Years 922 - 59,232 Ov Ov 10 10 ,5,1 - 1,653,612 ,5,1 - 1,653,612 ,3,4 1,559,674 2,834,741 ,7,1 3,771 1,877,218 er 5to er 5to er Years Years er Years Years 7,1 620,263 478,019 7,0 577,015 479,504 - - Abov Abov 276,283 358,625 e 10 e 10 ------Operational Risk 40.6 40.7 09 ShariahNon-ComplianceRisk 40.9 SystemicRisk 40.8 42.2 GENERAL 42.1 42. 1 DA 41. Chairman emplo This isthecollectiv T correctly tolong-termchanges instrategic par Str Str but wishestomo legal risksfallintothiscategory. Shariah Non-complianceriskarisesduetothelack ofa means ofcarefulmanagementcounterpartyrisksintheinter-bank market. association i.e.Pakistan Banks Association (“PB Group acti Systemic riskisreducedby theactivities ofbothnationalandinternationalregulatoryauthorities. Suc Systemic riskistheofatotalorpartialcollapsefinancialsystem. ev Group isa T income oftheGroupinrespectthattr a particulartransaction w T statements, exceptforcaptionsofthebalancesheetand profitandlossaccount. respect ofw Captions, asprescribedby BSDCircular No.04of2006datedFebruary 17,2006issuedby SBP, in on Mar T b he Groupfollows adeliberate low-risk str he figuresintheconsolidatedfinancialstatementsarerounded offtothenearestthousandofrupees. his riskisco hese consolidatedfinancialstatementsha y theShariahdepartmentofGroup. aluation processw ategic riskarisesduetowrongassumptionsinstrategic decisionmakingorthefailuretoreact ategic Risk TE OF h acollapsecouldbeduetotechnical factorsormarketdri y c ees andsystemsorfromexternalevents andw h 04,2010. AUTHORISA w v are oftheneedreducingrisk. ely supportstheseorganizationsthroughitsmembershipofrelevant bankingindustry hic v ered by carryingoutextensi h therearenoamounts,ha v e to e termforallrisksw hic w TION FORISSUE ards amoresophisticatedapproach inthecomingy h in hic Chief ExecutiveOfficer volv h may resultinreputationallosstotheGroup,aswellas,reversal of es alllevels ofmanagementandw T he GroupiscurrentlypursuingaBasicIndicator ansaction. hic ategy v v v h arisethroughinadequateorfailedinternalprocesses, e Shariahtraining andorientationfrequentreviews T e beenappro e notbeenreproducedintheseconsolidatedfinancial he Grouphasawellestablishedstrategic planningand ameters. . A W ”). ithin thegeneral constraints ofitsniche marketthe T hic he Groupalsotakesaccountofsystemicriskb h canonlybepartiallyquantified.Inaddition, w areness amongstthestaffwhile processing v ed by theBoardofDirectorsBank v en (psychological reasons). hic Director h issubjecttoregularreview ears. Approac h (BIA), Director The . y 113 Annual Report 2009 114 Annual Report 2009 Shareholders No. of 17728 3003 4588 428 317 141 17 10 25 12 26 27 28 44 85 1 1 2 1 1 1 1 1 5 1 2 2 4 1 3 2 2 2 1 2 3 2 1 3 5 4 6 5 5 6 370001 345001 295001 285001 265001 230001 220001 200001 195001 185001 180001 175001 170001 160001 145001 135001 130001 120001 115001 110001 105001 100001 95001 90001 85001 80001 75001 70001 65001 60001 55001 50001 45001 40001 35001 30001 25001 20001 15001 10001 From 5001 1001 501 101 1 Shareholding 700371,700 350,000 600,000 375000 286,625 350000 267,415 300000 231,328 290000 225,000 270000 200,446 235000 1,000,000 225000 185,937 205000 365,317 200000 358,337 190000 690,629 185000 164,320 180000 450,000 175000 280,000 165000 261,024 150000 244,992 140000 120,000 135000 225,845 125000 324,875 120000 210,000 115000 110000 105000 0001,690,700 100000 10000 50 92,000 260,436 419,754 315,750 95000 445,427 90000 343,281 85000 314,720 80000 351,122 75000 527,131 70000 65000 60000 55000 00 1,230,208 50000 50 512,054 45000 00 996,979 40000 50 864,735 35000 00 795,564 30000 50 1,029,735 25000 00 1,558,877 20000 50 1,805,065 15000 5000 003,535,727 1000 0 8,401,453 500 100 To Shares Held 6,310,395 3,275,712 14,724 Total Shares Held % 1.195 0.670 1.591 0.003 0.070 0.066 0.114 0.054 0.051 0.044 0.043 0.038 0.189 0.035 0.069 0.068 0.131 0.031 0.085 0.053 0.049 0.046 0.023 0.043 0.062 0.040 0.320 0.017 0.049 0.080 0.060 0.084 0.065 0.060 0.067 0.100 0.233 0.097 0.189 0.164 0.151 0.195 0.295 0.620 0.342 Shareholders 26,597 No. of 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 1 1 2 1 1 131050001 111255001 51420001 24320001 20770001 13970001 11325001 7650001 7285001 6600001 5700001 5430001 5240001 3835001 3195001 2495001 2355001 1855001 1600001 1525001 1465001 1290001 1230001 1145001 1095001 1055001 425001 420001 415001 395001 705001 695001 595001 515001 500001 495001 475001 445001 From Shareholding 3050 131,053,379 131055000 1200 111,256,116 111260000 1200102,847,766 24,322,500 20,771,500 51425000 13,973,500 24325000 11,328,000 20775000 13975000 11330000 650 7,650,500 7,285,517 6,603,975 7655000 5,702,050 7290000 5,431,880 6605000 5,242,000 5705000 3,836,206 5435000 3,200,000 5245000 2,500,000 3840000 2,356,055 3200000 1,855,519 2500000 1,601,943 2360000 1,529,343 1860000 1,468,500 1605000 1,291,500 1530000 1,231,729 1470000 1,149,679 1295000 1,100,000 1235000 1,059,304 1150000 1100000 1060000 200416,825 430000 425000 420000 000400,000 400000 100705,250 698,000 1,799,368 710000 519,084 700000 501,000 600000 1,000,000 520000 475,175 505000 500000 480000 500450,000 450000 To 527,967,898 Shares Held 422,000 427,396 Total Shares 24.822 21.073 19.480 Held % 0.079 0.080 0.076 4.607 3.934 2.647 2.146 0.134 0.132 0.341 0.098 0.095 0.189 0.090 1.449 1.380 1.251 1.080 1.029 0.993 0.727 0.606 0.474 0.446 0.351 0.303 0.290 0.278 0.245 0.233 0.218 0.208 0.201 0.085 0.081 100 115 Annual Report 2009 116 Annual Report 2009 Total General Public Modarba, ModarbaFundsandotherOrganizations Banks, DFI's,NBFI's,Insuarance Companies, Public SectorCompanies,Corporations, Hasan A. Bilgrami Chief Justice (Rtd.)MahboobAhmed Shabir Ahmed Randeree Ahmed G.M.Randeree and theirSpouseMinorChildren Directors, ChiefExecutiveOfficer, NBP Trustee-NI(U) T (LOC)Fund National BankofPakistan-TrusteeDepart NIT &ICP Dubai BankPJSC Jahangir Siddiqui&Co.Ltd. with morethan10%shareholding Associated Companies&Shareholders PARTICULARS AS ATDECEMBER31,2009 ADDITIONAL INFORMATION Total Others b. Foreign a. Local General Public: Modarba andMutualFunds Insurance Companies and NonBankingFinancial Instituitions Banks, Dev and relatedparties Associated Compnaies,undertakings and theirSpouseMinorChildren Directors, ChiefExecutiv PARTICULARS elopment F inancial Instituitions e Officer , SAEODN PERCENTAGE SHAREHOLDING SHAREHOLDERS HRHLESSAEODN PERCENTAGE SHAREHOLDING SHAREHOLDERS 26597 26448 26597 26437 141 104 15 19 13 1 1 1 1 1 1 1 1 3 2 4 100.00% 527,967,898 132,356,279 131,053,379 111,256,116 100.00% 527,967,898 242,309,495 103,477,674 48,875,082 51,423,883 51,423,883 75,598,389 10,840,044 47,343,420 33,930,009 6,619,600 7,849,267 499,079 130,829 350,000 599,368 0.095% 0.025% 25.07% 24.82% 21.07% 14.32% 45.89% 19.60% 0.07% 0.11% 9.26% 9.74% 9.74% 2.05% 8.97% 6.43% 1.25% 1.49%

JAP ITAL IRAN INDONESIA INDIA HONG KONG GHAN GERMANY FRANCE CHIN CANAD BRAZIL BELGIUM BELARUS B B AUSTRALIA COUNTRY ANGLADESH AHRAIN AN Y A A A K UNION DEBANQUES ARABES ETFRANC STAND K COMMONWEAL UNICREDIT B B BANC B B B STAND K UNION BANK OFINDIA STAND MASHREQ BANK NATION MASHREQ B K HONGK HBZ FINANCE LIMITED HABIB BANK LIMITED COMMONWEAL STAND NATION K COMMERZ BANK UNION DEBANQUES ARABES ETFRANC K HABIB BANK LIMITED HABIB C B HABIB BANK LIMITED JOINT-ST STAND B K COMMONWEAL NAME OFBANK UNION DEBANQUES ARABES ETFRANC UNION BANK OFINDIA STAND UNICREDIT BANK ZHEJIANG CHOUZHOUCOMMERCIALBANK CO. L Y WUXI CITYCOMMERCIALB STAND K HARBIN COMMERCIALB CHIN KEB AUSTRALIA LIMITED ANGZHOU CITYCOMMERCIALB OREA EXCHANGEBANK OFC OREA EXCHANGE B ANCO POPOLAREDI ANK SADERAT IRAN ANK MILLA ANK MELLIIRAN OREA EXCHANGEBANK D OREA EXCHANGEB OREA EXCHANGEBANK (DEUTSCHLAND) OREA EXCHANGEB ANCO KEBDOBRASILS.A. ANK ASIA LIMITED OREA EXCHANGEB OREA EXCHANGEB A EVERBRIGHTB A UBAE SP ARD CHARTERED B ARD CHARTERED B ARD CHARTERED B ARD CHARTERED BANK GHANA LIMITED ARD CHARTERED B ARD CHARTERED B ARD CHARTERED B ONG AND SHANGHAIBANKING CORPORA AL BANK OFP AL BANK OFP AN OCK SAVINGS BANK BELARUSB ADIAN B ANK T ANK A TH BANK OF TH BANK OF TH BANK OF AG AG ANK ANK ANK ANK ANK ANK ANK AKISTAN AKISTAN VERONA ANK ANK ANK ANK ANK ANK ANK ANAMON ANK AUSTRALIA AUSTRALIA A ANADA USTRALIA ANK ANK AISES AISES AISES AG TD TION 117 Annual Report 2009 118 Annual Report 2009 SAUDI ARABIA ROMANIA QATAR PHILIPPINE PANAMA PAKISTAN OMAN NIGERIA NETHERLANDS NEPAL MAURITIUS MALAYSIA KUWAIT KOREA KENY JORDAN A SAUDI HOLLANDIBANK NATIONAL COMMERCIALBANK ALRAJHI BANKING &INVESTMENTCORPORA TION ROMANIAN INTERNATION AL BANK SA UNITED BANK LIMITED QATAR ISLAMICBANK KOREA EXCHANGEBANK KOREA EXCHANGEBANK UNITED BANK LTD STANDARD CHARTERED BANK SONERI BANK LIMITED SILKBANK LIMITED SAMBA BANK LIMITED NIB BANK LIMITED NATIONAL BANK OFPAKISTAN MY BANK LIMITED MEEZAN BANK LTD MCB BANK LIMITED KASB BANK LIMITED JS BANK LIMITED HABIB METROPOLITAN BANK LIMITED HABIB BANK LIMITED FIRST DAWOOD ISLAMICBANK LIMITED FAYSAL BANK LIMITED EMIRATES GLOBAL ISLAMICBANK LIMITED DUBAI ISLAMICBANK PAKISTANLIMITED BANK OFPUNJAB (THE) BANK OFKHYBER(THE) BANK ALFALAHLIMITED BANK AL HABIBLIMITED ATLAS BANK LIMITED ASKARI BANK LTD ARIF HABIBBANK LIMITED ALLIED BANK LIMITED ALBARAKA ISLAMICBANK B.S.C. (E.C.) HABIB BANK OMAN PLATINUM HABIBBANK PLC KOREA EXCHANGEBANK HABIB BANK LIMITED STANDARD CHARTERED BANK HIMALAYAN BANK LIMITED HABIB BANK LIMITEDMAURITIUS STANDARD CHARTERED BANK MALAYSIA BERHAD EON BANK BERHAD BANK MUAMALAT MALAYSIA BERHAD COMMERCIAL BANK OFKUWAIT SAK,THE UNION DEBANQUES ARABES ETFRANCAISES STANDARD CHARTERED FIRSTBANK KOREA LTD. KOREA EXCHANGEBANK STANDARD CHARTERED BANK KENYA COMMERCIALBANK LIMITED GULF STANDARD CHARTERED B AFRIC AN B ANK LIMITED ANK VIETNAM UKRAINE U.A.E. U.S.A. U.K. TURKEY THAILAND TAIWAN SWITZERLAND SWEDEN SRI LANKA SPAIN SOUTH AFRICA SINGAPORE VINASIAM BANK VIETNAM ASIA COMMERCIALJOINT-STOCKBANK KOREA EXCHANGEBANK, HANOIBRANCH ASIA COMMERCIALBANK DEMARK BANK JS CREDIT DNEPRBANK STANDARD CHARTERED BANK MASHREQ BANK HABIB BANK LIMITED HABIB BANK AGZURICH DUBAI BANK PJSC ABU DHABIISLAMICBANK ABU DHABICOMMERCIALBANK STANDARD CHARTERED BANK SAEHAN BANK, LOSANGELES MASHREQ BANK KEB NYFINANCIAL CORPORATION HABIB BANK LIMITED HABIB AMERICANBANK DEUTSCHE BANK TRUST COMPANY AMERICAS COMMONWEALTH BANK OFAUSTRALIA STANDARD CHARTERED BANK MASHREQ BANK KOREA EXCHANGEBANK ISLAMIC BANK OFBRITAIN PLC HABIBSONS BANK LIMITED HABIB BANK AGZURICH HABIB –UKPLC COMMONWEALTH BANK OFAUSTRALIA TEKSTIL BANKASI S.A. HABIB BANK LIMITED STANDARD CHARTERED BANK KOREA EXCHANGEBANK STANDARD CHARTERED BANK UNITED BANK A.G. KOREA EXCHANGEBANK (SCHWEIZ)AG HABIB BANK AGZURICH SVENSKA HANDELSBANKEN STANDARD CHARTERED BANK HATTON NATIONAL BANK LIMITED CAJA DE AHORROS DELMEDITERRANEED BANCO ESPANOL DECREDITO HBZ BANK LIMITED K HABIB BANK LIMITED COMMONWEALTH BANK OFAUSTRALIA UNION DEBANQUES ARABES ETFRANCAISES STANDARD CHARTERED BANK OREA EXCHANGEB ANK, SINGAPOREBRANCH 119 Annual Report 2009 120 Annual Report 2009 Nazimabad No.7Br Malir CanttBr Kor Karac J Gulshan-e-Ma F.B Dhor D Cloth MarketBr Burns RoadBr Baqai MedicalUni Baloc Al HilalSocietyBr 26th StreetD Main BranchClifton(Karachi) odia BazarBr .H.A. PhaseIVBr . Area Br angi Br aji Br h Colony Br hi Stock Exchange Br Fax: (021)36707497 Tel: (021)36707492-96 Nazimabad No.7,Karachi Plot No.4,RowNoI,Sub Block-B,Block-III, Fax: (021)34491483 Tel: (021)34491481-82 Malir Cantt,Karachi Plot No.35,Block-5,CanttBazar, Fax: (021)35114494 Tel: (021)35114488-91 Korangi IndustrialArea,Karachi Plot No.51/9-B,Sector15, Fax: (021)32462490 Tel: (021)32462861-67 Room No.520,5thFloor,K.S.E.Building,Karachi Fax: (021)32416368 Tel: (021)32462487-9,32462831-4 Jodia Bazar,Karachi Ibrahim Manzil,DaryaLalStreet, Fax: (021)36833445 Tel: (021)36833354-5 Areeba Heaven,SB-3,SectorX-II,Karachi Fax: (021)36364659 Tel: (021)36827783-7,36364596 KDA SchemeNo.16,Karachi Plot No.C-6,Block4,F.B.Area, Fax: (021)34860569 Tel: (021)34860407-10,34860566-68 Cooperative HousingSociety,Dhoraji,Karachi Al-Madina Heights,PlotSurveyNo.35-C/449CPBerar Fax: (021)35313190 Tel: (021)35313191-7 D.H.A. PhaseIV,Karachi Plot No.36-C,SunsetCommercialStreetNo.2, Fax: (021)32469030 Tel: (021)32469031-35 Laxmidas Street,Karachi Shop-05, CochinwalaMarket, Fax: (021)34410219 Tel: (021)34410220-34410201 Super Highway,nearTollPlaza,Karachi 51-DHTOR, BaqaiMedicalCentre, Fax :(021)32215480 Tel: (021)32215505,32215527,32215689 Quarters, BurnsRoad,Karachi Land SurveySheetNo.AM51,ArtilleryMaidan Fax: (021)34300043 Tel: (021)34300036-42 Plot No,SA-2/1Block-3AdministrativeSociety,Karachi Fax: (021)34860704 Tel: (021)34860713-16,34860728 Chandni Chowk,Karachi No. SC-11,KDAScheme7,MainUniversityRoad, Shop No.1GroundFloor,JawwadCourt,Plot Fax: (021)35349243 Tel: (021)35349244-5 Phase V,D.H.A.Karachi 31-C, BadarCommercialStreetNo.1,26thStreet, Fax: (021)35378373 Tel: (021)3 Marine Drive,Block-4,Clifton,Karachi 11th Floor,ExecutiveTower,DolmenCity, SINDH anc anc anc .H.A. Br h (Kar ymar Br h (Kar anc anc anc h (Kar anc 5839906 anc h (Kar h (Kar h (Kar anc v anc h (Kar ersity Br achi) achi) anc h (Kar achi) anc h (Kar anc h (Kar achi) achi) achi) h (Kar h (Kar h (Kar achi) anc achi) achi) anc achi) h (Kar achi) achi) h (Kar achi) achi) achi) Gulistan-e-J Heer Saddar Br Univ Shahra-e-F UP MoreBr Shaheed-e-Millat Br Shah Faisal Colony Br Shadman S.I.T Rashid MinhasRoadBr Po Or North NazimabadBr North NazimabadBlock A Br wer HouseBr angi .E. Br ersity RoadBr abad Br Fax: (021)36950167 Tel: (021)36950158-59-61-66 North KarachiTownship, LS-7, StreetNo.8,SubSector11-I, Fax: (022)2636864 Tel: (022)2636768-70,2636862 -3 Hyderabad A/113-261, JailRoad,Heerabad, Fax: (021)35219895 Tel: (021)35219891-94 Raja GhazanfarAliRoad,Karachi Habib ShoppingMall,BohriBazaar, Fax: (021)34619583 Tel: (021)34619514-18,34619563,34619573-4 Karachi KDA Scheme36,Gulistan-e-Johar, Shop No.W-12,EasternPride,Block15, Fax: (021)34555991 Tel: (021)34555985-87 Maqbool C.H.S.Ltd.,Karachi Survey SheetNo.35/1,Block7&8, Shop No.1,FaisalTower,Plot25/3, Fax: (021)34145311 Tel: (021)34145305-8 Shaheed-e-Millat Road,Karachi Shop No.15&16,AdamArcade,B.M.C.H.S., Fax: (021)34801541 Tel: (021)34801540,34839031-34 Karachi Block 16,Gulshan-e-Iqbal, Adjacent toDolphinBakery,SaleemPlaza, Fax: (021)34686126 Tel: (021)34686121-25 Shah FaisalColony,Karachi Plot No.A/7Survey135,DehDrighColony, Shop No.1&2,PlotNoA/6, Fax: (021)36950034 Tel: (021)36950027-33 North Nazimabad,Karachi Sector 14/B,ShadmanTownNo.1, Shop No.1-5,KDAFlats,Phase3, Fax: (021)32587510 Tel: (021)32587661-2,32587665 E-31-B, GhaniChowrangi,S.I.T.E.,Karachi Shop Nos.8&9,AnumTradeCenter, Fax: (021)34818135 Tel: (021)34818227-9 Gulshan-e-Iqbal, Karachi Plot No.FL-3/13&14,Block-5, Fax: (021)36901364 Tel: (021)36901356-9,36901362 Power House,NewKarachi ST-3 AS-28CommercialArea,Sector5-H, Fax: (021)36662257 Tel: (021)-36664031-34,36692257-59 Block D,OrangiTown,Karachi Plot No.LS55&56,ST11-A,Sector1, Fax: (021)36676488 Tel: (021)36676474-75 North Nazimabad,Karachi D-5, Block-L, Fax: (021)36722507 Tel: (021)36722504-6 Block A,NorthNazimabad,Karachi Shop No.3A,3B,3C,2BUniqueCentre, To anc To wn Br anc aisal Br auhar Br wn Br anc anc h (Kar h (Kar h (Kar anc anc h (Hyder anc anc anc achi) h (Kar achi) h (Kar anc anc anc h (Kar h (Kar achi) anc h (Kar anc h (Kar h (Kar h (Kar h (Kar abad) achi) achi) h (Kar achi) achi) achi) achi) anc achi) achi) achi) achi) h (Kar achi) Kuc Dukki Br Zhob Br Lor Pishin Br Chaman Br Qila SaifullahBr Muslimbagh Br Airport RoadBr Iqbal RoadBr Jinnah RoadBr Larkana Br Naw T Sukkur Br Mirpurkhas Br A ando Allah uto BahanBr alai Br hlak Br abshah Br Fax: (081)2840135 Tel: (081)2864627-29,2840114,2840121 Alam KhanChowk,AirportRoad,Quetta Fax: (0824)667306 Tel: (0824)667301-303 Masjid Road,Dukki Fax: (0822)412136 Tel: (0822)412130-31,412047-49 Market Road,Zhob Fax: (0824)661701 Tel: (0824)661696-700 Bhagi Bazar,Loralai Fax: (0826)421387 Tel: (0826)421381421384 Pishin Bund Road,OppMadinaHardware, Fax: (0826)618039 Tel: (0826)618032-37 Trench Road,Chaman Fax: (0823)610806 Tel: (0823)610895-899,610804-806 Main JunctionRoad,QilaSaifullah Fax: (0823)669830 Tel: (0823)669823-29 Muslimbagh, Baluchistan Fax: (081)2891580 Tel: (081)2891591-2 Chaman Road,Quetta Fax: (081)2829739 Tel: (081)2866510-13-36 Sharah-e-Iqbal, Quetta Khatooni No.234,Ward18,Urban1, Shop No.605,Khewat200, Fax: (081)2821650 Tel: (081)2821743-2821758 Jinnah Road,Quetta BALOCHISTAN Fax: (074)4059887 Tel: (074)4059833-6,4059884-6 Word-A BankSquareRoad,Larkana City SurveyNo.1806 Fax: (0244)330928 Tel: (0244)330920-4,330926-7 Ward AMasjidRoad,Nawabshah City SurveyNo.225 Fax: (022)3891699 Tel: (022)3891114,3892424,3891442,3892443 Tando Allahyar Mir PurKhasRoad, Fax: (071)5617329 Tel: (071)5617322-8 Station Road,Sukkur Umar WeldingStoreCity,SurveyNo.3/21, Fax: (0233)875802 Tel: (0233)874287 New TownStationRoad,MirpurKhas Fax: (022)3820308 Tel: (022)3820301-7 Block C,AutoBhanRoad,Hyderabad Plot No.C-10-8,C-10-3, anch anch anch anch anch anch anc anch Y ar Br anc h (Quetta) anch anch anc anc anch anc anch h (Quetta) h (Hyder anch h (Quetta) h (Quetta) abad) D V Gulgusht Br Abdali RoadBr Jhang Br Gujranw W Airport RoadBr * includingSub Branches Darogha w Badami BaghBr Azam ClothMarketBr Cir Akbar Chowk Br Jail RoadBranch(Lahore) J G-Bloc F T ohar erozepur RoadBr hokar NiazBaigBr ehari RoadBr .H.A. Y Block Br alton RoadBr cular RoadBr Fax: (042)36530517 Tel: (042)36530512-16 Lahore 326 G.T.Road(LinkShalimarRoad), Fax: (061)6761907 Tel: (061)6761900-6 Vehari Road,Multan Fax: (061)6210376 Tel: (061)6210371-5 Jalal MasjidChowk,Multan Fax: (061)4500360 Tel: (061)4500356-59 Multan Abdali Road,ChowkNawanSher, Fax: (047)7651406 Tel: (047)7651401-05 95-A CollegeChowk,Jhang Fax: (055)3820517 Tel: (055)3820511-16 GT Road,Gujranwala Gujranwala BX-11-75-7S-10-12, Fax: (042)36603702 Tel: (042)36603701 Walton Road,Cantt.,Lahore Plot 48-E,SuperTown, Fax: (042)35701165 Tel: (042)35701160-64 Lahore Cantt(AdjacenttoPhaseVIII), Plot No.595/8,AirportRoad,MainDefence Fax: (042)35315711 Tel: (042)35315710 M-Block, JoharTown,Lahore Fax: (042)37723882 Tel: (042)37723865-68,37723881 23-Peco Road,BadamiBagh,Lahore Fax: (042)37658232 Tel: (042)37670188,37658602,37670256 F-1207 AzamClothMarket,Lahore Fax: (042)37374016 Tel: (042)37374009-15 Circular Road,NearMochiGate,Lahore Fax: (042)35221738 Tel: (042)35221731-7 Akbar Chowk,Lahore 883-D, PecoRoad,FaisalTown, Fax: (042)35790573 Tel: (042)35790571 Lahore Near EFUBuilding,JailRoad, Plot No.5-A,HouseNo.5,MainGulbergRoad, Fax: (042)35315641 Tel: (042)35315636-40 Thokar NiazBaig,Lahore 3/D- NawabTown,RaiwindRoad, Fax: (042)37524331 Tel: (042)37524321-24-25-27 Plot No.174,FerozPurRoad,Lahore Fax: (042)35692499 Tel: (042)35692598-9,35692637 153, YBlock,D.H.A.,Lahore Fax: (042)35691073 Tel: (042)35691066-72 Stadium Road,D.H.A.,Lahore 47-G, CommercialArea,PhaseI,Block-G, To k, D.H.A. Br PUNJAB wn Br anch ala Br ala gateBr anc anc anch anc anc h (Multan) anc anc anc anc anc h (Lahore) anc h (Multan) h (Multan) anc anc h (Lahore) h (Lahore) h (Lahore) h (Lahore) anc h (Lahore) h (Lahore) anc h (Lahore) anc h (Lahore) h (Lahore) h (Lahore) h (Lahore) T Hazro Br J Saddar Br Satellite Chaklala Scheme No.3(Ra Sahiw Mainw Kashmir RoadBr Okar Bhaw Sargodha Br Sadiqabad Br Rahimy Mian ChannuBr Susan RoadBr Kotw D SIE 1Br ehlum Br axila Br .G. KhanBr a Br ali RoadBr alpur Br Fax: (051)4534985/4535047 Tel: (051)4535055-8 Faisal ShaheedRoad,Taxila Fax: (057)2310019 Tel: (057)2310048-51 Circular Road,Hazro Fax: (0544)620498 Tel: (0544)620503-4-8 Tehsil Road,NearShandarChowk,Jehlum Fax: (051)5120385 Tel: (051)5120381-4 60-Bank Road,RWPCantt,Rawalpindi Fax: (051)4572005 Tel: (051)4572001-4 Satellite Town,Rawalpindi 69/B, 4thRoad,CommercialMarket, Fax: (051)5766144 Tel: (051)5766140-43 Chaklala SchemeIII,Rawalpindi Plot No.11,CommercialBazar, Fax: (040)4462688 Tel: (040)4228284-88,4467688 418, HighStreet,Sahiwal Fax: (0459)237532 Tel: (0459)237531 Main SargodhaRoad,Mianwali Mouza urrakhelPacca, Fax: (052)4270426 Tel: (052)4270419-20,4270429-30,4270439-40 B-III-116/99/2, KashmirRoad,Sialkot Fax: (044)2552907 Tel: (044)2522901-6 69/1, M.A.JinnahRoad,Okara Fax: (062)2732239/2732240 Tel: (062)2732235-38 Bahawalpur Block No.915,CircularRoad, Fax: (048)3768269 Tel: (048)3768264-68 65/2, RailwayRoad,Sargodha Fax: (068)5800598 Tel: (068)5700594-7,5800591 Sadiqabad Allama IqbalRoad,Opp.GhallaMandi, Fax: (068)5886978 Tel: (068)5886971-77 21-A, ModelTown,RahimYarKhan Fax: (065)2664008 Tel: (065)2664001-7 Ghazi Mor,G.TRoad,MianChunnu Fax: (041)8728671/8728708 Tel: (041)8728626-8,8728631 Main SusanRoad,Faisalabad Plot No.S-8,MadinaTown, Fax: (041)2412130 Tel: (041)2412123-29 P-16, KotwaliRoad,Faisalabad Fax: (064)2473208 Tel: (064)2473201-7 Jampur Road,NearDistrictHospital,D.G.Khan Fax: (053)3538016 Tel: (053)3538010-15 Danish MetalWork,SIE-1,Gujrat al Br ali Br ar khanBr anc To anch anch anch anc anch anch wn Br h (Gujr anch anch anch h (Ra anch anch anc anc anch anc anc anch h (F walpindi) at) h (F h (Ra h (Sialkot) aisalabad) aisalabad) walpindi) walpindi) T W Chitr Abottabad Br Der Islamgarh Br Mirpur Br F-10 MarkazBr I-8 Br I-9 Br Blue Area Br Gilgit Br Kh Chakw Mansehr Haripur Br J amrud RoadBr urnol Br ah Cantt.Br yber BazarBr a IsmailKhanBr al Br anc anc Fax: (051)2217021 Tel: (051)2217022 Islamabad Muhammad AyubPlaza,MainG.TRoad, Fax: (0992)343957,343964 Tel: (0992)343959-63 Aamir ShaheedRoad,SupplyBazar,Abottabad Abbottabad BusinessComplex(ABCPlaza), Fax: (0966)715021 Tel: (0966)715018-20 Dera IsmailKhan West CircularRoad,NearTaankAdda, Fax: (0997)303479 Tel: (0997)307761-4 Tehsil &DistrictMansehra Swati Arcade,AbbottabadRoad, Fax: (058612)43970 Tel: (058612)43971-7 Islam GarhTehsil,DistrictMirpur,AJK Ground Floor,MainKotliRoad, Fax: (058610)39705 Tel: (058610)39701-4 Mian MuhammadRoad,Mirpur,AJK Plot No.2-B/3,SubSectorA/2, Fax: (051)2222965-6 Tel: (051)2222961-64 Plot No.6-C,InsafPlaza,F-10Markaz,Islamabad Fax: (051)4861118 Tel: (051)4861017,4861029,4861117 Executive Centre,I-8Markaz,Islamabad Fax: (051)4445852 Tel: (051)4858403-08 Plot No-2E,I-9Markaz,Islamabad. Fax: (051)2804275 Tel: (051)2804271-74 Jinnah Avenue,Islamabad 5-6, ChenabCenter,Block-104-E,F-7/G-7, ISLAMAB Fax: (05811)57837 Tel: (05811)57832-6 Askari Bakers,GilgitCantt Fax: (0943)414591 Tel: (0943)414501,414530,414550 Attalique Bazar,Chitral NWFP Fax: (0543)552742/552760 Tel: (0543)552739,44,45,56 Khasra No.4516,JhelumRoad,Chakwal Fax: (051)4539044 Tel: (051)4539046-7 A-12, ShahwaliColony,MallRoad,WahCantt Fax: (0995)613574 Tel: (0995)613570-3 Circular Road,Haripur Fax: (091)5711489 Tel: (091)5711482-4 Near HotelGrand,JamrudRoad,Peshawar Fax: (091)2590347-8 Tel: (091)2590341-6 Situated atKhyberBazar,Peshawar Haji KhanBuilding,OppositeUPlaza Shop No.6&7,GroundFloor,SurveyNo.412/B(1) al Br anch a Br h (Islamabad) h (Islamabad) anch anch anch anch anch anc anch anch anch anch anc anc h (Islamabad) anc AD & AZAD KASHMIR h (Islamabad) h (P h (P anch eshawar) eshawar) 121 Annual Report 2009 122 Annual Report 2009

Tuesda and actforme/usonmy/ourbehalfatthe6thAnnualGeneralMeetingofBankIslamiPakistanLimited,tobeheld or failinghim/her______of______asmy/ourproxytovote hereb Account No./CDCParticipantI.D.No.______andSubNo.______do Share RegisterFolioNo.______and/orCDCInvestor BankIslami PakistanLimitedandholderof______ordinarysharesasper I/We ______of______beingamember(s) Karachi, Pakistan Block -4,Clifton, Dolmen City,MarineDrive, 11th Floor,ExecutiveTower, BankIslami PakistanLimited, The CompanySecretary, 6th AnnualGeneralMeeting Proxy Form National Identitycard orPassportwith thisproxy formbeforesubmission tothe company. 2. CDCShareholders andtheirProxiesareeach requestedtoattachanattested photocopyoftheirComputerized 1. Proxiesinorder tobeeffective,must received bythecompanynot lessthen48hoursbeforethe meeting. NOTES: CNIC orPassportNo.:______Address: ______Name: ______Witness: Signed this______dayof______2010 y appoint______of______y , March30,2010at8:00a.m.HotelRegentPlaza,Shahra-e-Faisal,Karachi,andanyadjournmentthereof. Signature ofMember(s) Rupees Five Please affix Revenue Stamp

Annual Report 2009 Please affix correct postage

The Company Secretary

BankIslami Pakistan Limited 11th Floor, Executive Tower, Dolmen City, Marine Drive, Clifton Block - 4, Karachi, Pakistan